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Trade Against The 90% That Lose Money COT/Retail Review

Courtesy of Pivotfarm

The Commitment of Traders Report is created by the CFTC – The Commodity Futures Trading Commission and is published weekly every Friday. This body gathers and publishes the open futures positions on all publicly traded US futures contracts as well as the corresponding options. The data consists of 3 main categories.

Commercial Traders – These are the bigger players in the markets, the smart money and consist of large firms that actually use the commodity being traded, includes companies like…BP in the Oil and Gas Market, Nestle in the Cocoa and Sugar market. The main function of these traders is to hedge the price of the commodity that they trade in.

Large Speculators – These consist primarily of commodity fund traders and are mainly trend following. The position sizes of these traders tends to be in tandem with the movement of price.

Small Speculators – The little guys, individual traders and small firms, these are the traders that tend to be wrong in the market at the tops and bottoms of markets.

How do we use this data? We believe that the COT Index offers a good indication of market sentiment and future direction. The key is to follow the smart money (Commercial) and trade against the other 2 groups when they are at an extreme. Extremes in the data are figures below 30.00 and above 70.00. The ideal situation for a short position is a low reading in the Commercial COT and high readings in the Large and Small trader numbers. For example the Commercial COT Index reads 5.97, this means that the net commercial position is strongly biased to the short side. The Large and Retail (our main contrarian focus) are reading 97.70 and 100.00 respectively, meaning they are the most long side biased they have been in the last 6 months. For traders this means that their focus should be on short side trades, the goal is to follow the commercial traders when the other 2 groups at opposite extremes.  This is the ideal alignment of the groups for optimum success.

This weeks COT Index Review

e-mini S&P 500: We started last week with a punch through the 6 month highs, although we had a bullish start the week ended relatively neutral. COT positioning however remains strong on the long side. We see no reason for this to change on the basis of the COT report.

Signal:  Bullish

EURUSD: More volatile but ultimately sideways action from the EURUSD, COT positioning has weakened a little from the 6 month high we had in the previous report but the overall position remains to the long side.

Signal: Bullish

GBPUSD: In last weeks report we asked the question, are we seeing an accumulation pull back? The answer from the market was most certainly yes! As the GBPUSD rallied over 350 pips from the lows after a very bullish COT reading. This weeks COT again is bullish although not quite at the level of the previous week.

Signal: Bullish

USDJPY: Our COT analysis has been very bearish on the USDJPY for a long while and last weeks action provided a big confirmation of that view, with the USDJPY making 15 year lows.! Although Cot has softened a little this week, it remains bearish

Signal: Bearish

Retail Trader Position Analysis Also known as the Long-Short ratio this is a tool primarily offered by Forex firms, we haven’t been able to come across the same data in the futures as yet. The data is based upon the collective trades and trading direction of many thousands of retail traders (the average Joe). This group of traders is notoriously wrong at predicting market direction, market tops and bottoms with some simple analysis we can look at this data and take a contrarian view, for example if over 70% of retail traders are long USDJPY this offers us a short bias. Savvy traders should then be focusing there energies on short side trades.

USDJPY: Retail positioning of the USDJPY has reached the stratospheric levels of 83.68% Long! Amazing! The strength of the Yen remains strong, there are market rumors of further intervention to be announced.

EURUSD: A volatile but ultimately sideways week for the Euro, retail traders remain short but with a slightly weaker position than what we saw last week.

GBPUSD: Retail positioning in the pound shifted dramatically last week, with the percentage of traders short is now 66.56%! This takes them in to our Strong Long zone on the anti-retail trader tool.

Provided by Pivotfarm – The Home of Support and Resistance Trading


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Sign up today for an exclusive discount along with our 30-day GUARANTEE — Love us or leave, with your money back! Click here to become a part of our growing community and learn how to stop gambling with your investments. We will teach you to BE THE HOUSE — Not the Gambler!

Click here to see some testimonials from our members!