If you get a valid trade signal based on your strategies, and the COT data isnt near an extreme, that doesnt mean you shouldnt take your trade signal. The TFF report breaks down the reportable open interest positions into four classifications:. If you are trading the USD/CAD, the same analysis would apply, but it would be flipped upside down. We have two compelling price action reasons to consider a long trade. Of course, its difficult to determine the exact point where a sentiment extreme will occur so it might be best to do nothing until signs of an actual reversal are seen. The COT data should not be acted on alone though; wait for price to confirm a potential reversal signal in the COT data (more on this later). But we want more evidence, which is why I usually wait for a pullback before taking trade (with most of my strategies). They know they will be producing gold, and will need to sell. This is why we dont use the COT in isolation.
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When looking at COT data, start with at least a 10 year chart for picking out extreme levels. The Commodity Futures Trading Commission (Commission or cftc) publishes the Commitments of Traders cOT ) reports to help the public understand market dynamics. The Disaggregated reports are broken down by agriculture, petroleum and products, natural gas and products, electricity and metals and other physical contracts. Youre probably asking yourself, Why the heck do I need to use data from the FX futures market? COT Report Forex Trading Extreme Levels Can Indicate a Reversal When speculators are accumulating a position it can be a confirmation that there is interest in the trend. COT Report Forex Trading Conclusion One way I like to use COT data on my chart is to look for extremes in Large Spec. By watching the behavior of these players, youll be able to foresee incoming changes in market sentiment. The Traders in Financial Futures (TFF) report includes financial contracts, such as currencies, US Treasury securities, Eurodollars, stocks, VIX and Bloomberg commodity index. If hedgers keep increasing their long positions while speculators increase their short positions, a market bottom could be in sight.