The Commodity Futures Trading Commission (Commission or CFTC) publishes the Commitments of Traders (COT) reports to help the public understand market dynamics. Specifically, the COT reports provide a breakdown of each Tuesday’s open interest for futures and options on futures markets in which 20 or more traders hold positions equal to or above the reporting levels established by the CFTC. The CFTC releases the weekly COT reports in static format to support the historical usage patterns of industry professionals viewing and accessing each week’s data. Each historical report is viewable with the data for the respective reporting week, along with all historical data compressed within an annual file. In October 2022, CFTC began publishing weekly and historical report data within a public reporting environment to support industry professionals needing to customize, search, filter, and download report data for analysis and trends. The Commitment of Traders (COT) report is a valuable tool that provides traders with a deep dive into the market sentiments and positions of different types of traders.

For example, in the EUR/USD pair, while the rate has been trading lower since April 2018, note how overwhelmingly bullish asset managers remain? The US yield curve, with the risks of inverting in the near future, is another mid to long-term component that asset managers would analyze to understand the outlook, and as it stands, the market is far from telegraphing that the US economy is on a sustainable path. These are all factors that have an impact on asset managers to remain bullish in EUR/USD.

Long vs Short

Another theory is that commercial traders understand their market the best and taking their position has a better chance of profit (which is pretty much the same thing as the “small speculators” being wrong). With access to COT data, investors can spot long-term market trends and modify their portfolios appropriately. When it comes to the COT data analysis, this may serve as the foundation for professional traders to develop effective trading strategies and make informed, prudent decisions at last.

Why Following the CoT Offers an Edge?

Large traders (funds) are typically trend-followers and will add or liquidate their positions depending on the technical action of the market since the release date of the report. The COT report’s results can be used as a tool to give traders a better understanding of the psychology of the marketplace, the net position of the commercials in the market, and the net position of the large traders. In general, the large speculator category represents fund traders and professional traders who carry large positions.

Note, this group’s involvement orbits around their need to buy or sell the futures contract in order to minimize the risk of exchange rate variations down the road, with a tendency to carry large positions too. Due to the hedging nature of its activity, they act as contrarian traders, buying when prices are low and vice versa. As one would expect, the largest positions are held by commercial traders that actually provide a commodity or instrument to the market or have bought a contract to take delivery of it. Thus, as a general rule, more than half the open interest in most of these markets is held by commercial traders. There is also participation in these markets by speculators that are not able to deliver on the contract or that have no need for the underlying commodity or instrument. They are buying or selling only to speculate that they will exit their position at a profit, and plan to close their long or short position before the contract becomes due.

1. Fx Pips Guru is a forex trade copying service provider company from expert traders.
2. The Dealers may not mainly sell futures, but they design and sell different financial assets to their customers.
3. The COT report released on a weekly basis summarizes the net positions of the most important market participants in the futures market.
4. The Commitments of Traders is a weekly market report issued by the Commodity Futures Trading Commission (CFTC) enumerating the holdings of participants in various futures markets in the United States.
5. By reviewing the positions of commercial traders, who are often slower to adjust to market fluctuations but more aligned with economic fundamentals, traders can develop a strategy that captures the broader market direction.
6. In the 1990s, the report moved to a bi-weekly publication before going weekly in 2000.

Trend Analysis

You should only trade in these products if you fully understand the risks involved and can afford to incur losses. They may not always translate into immediate price movements, and the market can stay in overbought or oversold territory for extended periods. Hence, trading strategies should integrate COT data with other market analysis tools (technical indicators, fundamental data). Extreme readings in net positions within the COT report can signal a potential market reversal. However, it is crucial to exercise caution, as these extremes may persist for extended periods.

The COT report should not be used solely for short-term trading signals. Confirmation from other indicators is necessary to identify potential trend shifts. The long version of a COT report, in addition to the information in the short report, groups the data by crop year, where appropriate, and shows the concentration of positions held by the largest four and eight traders. Department of Agriculture’s Grain Futures Administration issued an annual report outlining hedging and speculation activities in the futures market. In the 1990s, the report moved to a bi-weekly publication before going weekly in 2000.

For example, some agricultural commodities have predictable seasonal trends that traders can anticipate by reviewing historical COT data. Additionally, the data can be categorized by market participants, i.e., Commercials, Large Speculators, and Small Speculators, too. These filter options help traders conduct more precise analyses and develop specific strategies for each COT market.

1. It is used by many futures traders as a market signal on which to trade.
2. It is a core data source for traders and for most academic research on pricing trends in the futures market.
3. All positions of a trader that is listed by the CFTC is categorized as a commercial traders position when the holding purpose is hedging.
4. By examining instances where COT data, combined with other analyses, led to accurate trades, traders can refine their own COT integration strategies and potentially avoid common pitfalls.

Other Reportables contain all traders which are not categorized by the other classifications. That often includes central banks, smaller banks, credit unions and any other reported trader by the CFTC. This sample is from the December 12, 2006, COT report (short format), published in the traditional format, showing data for the Chicago Board of Trade’s (CBT) wheat futures contract. commitment of traders forex Antecedents of the Commitments of Traders (COT) reports can be traced all the way back to 1924.

Why would commercials increase their exposure in a week when prices traded higher? More often than not, the reason lies in a fundamental shift in their perception of cheap or expensive valuations. Open interest represents the total number of contracts outstanding among all market participants. We should think of open interest as new business (additional liquidity). While volume measures the actual number of options or futures being exchanged between buyers and sellers.