Commitments of Traders COT reports and charts

Every other reportable trader that is not placed into one of the other three categories is placed into the “other reportables” category. Before we discuss how to trade the forex market using the COT Report, you should know why the COT Report is important for forex traders. But if you need details on past data, check the historical data section of the CFTC website. And if you need to check the weekly reports in a particular month, use the Historical Viewable section of the website. The COT report that has data on the forex market is the ‘Current Legacy Reports.’ Under the ‘Current Legacy Reports,’ select the formats belonging to the Chicago Mercantile Exchange.

Thus a positive number means they hold more long positions than short and vice versa. Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you.

Taming the Bulls and Bears: The Power of Causal Inference in Stock Market Analysis

The information in the report indicates how much interest there is, both long and short, in various derivatives contracts, and which type of market actor is involved. Looking at the COT example in the table above, we can see that Nasdaq 100 futures, traded on the Chicago Mercantile Exchange (CME) had an open interest of 57,779 contracts on June 15, 2021. Of these, 14,320 were longs held by dealers and 10,875 shorts sold by institutional traders. The COT also delineates the number of contracts involved in spreads. The specific number is not necessarily important, but rather a clear sign in percentage terms of open interest which makes it easy in identifying ‘Non-Commercials’ flipping against the primary trend. Furthermore, when a key flip in sentiment of ‘Non-Commercials’ is realized and there is a confirmation on the charts that a trend is exhausting, traders are likely trading in the same direction of the big kids.

In general, the large speculator category represents fund traders and professional traders who carry large positions. The number “non-reportable” positions is derived from subtracting the number of large spec and commercial positions from the total open interest. This group of traders is generally thought to be small speculators and hedgers who are not holding a position large enough to report to the CFTC. The Commodity Futures Trading Commission commitment of traders report forex (CFTC) COT report offers a unique look at the positioning of futures traders across a broad range of markets, and it is quite often used as a proxy for the FX trading market. In the weekly report, the US regulator breaks down long and short positions and overall open interest according to three separate trading groups. Knowing where traders’ positions are in the forex market can be valuable information when constructing trade ideas.

Business 101

The line chart shows if the Commercials, Institutionals and Retail Traders are more long biased (value above 50) or more short biased… There have been recommendations to publish more detailed data on a delay as not to affect commercially sensitive positions, but that still looks unlikely. And, despite its limitations, most traders agree that even the questionable data of the COT is better than nothing.

• The COT report is a weekly sentiment report that can provide forex traders with important information on the positioning of currency pairs.
• Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader.
• These traders are engaged in managing and conducting organized futures trading on behalf of clients.
• 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.
• These major market drivers include institutional traders, hedge funds, big banks, and more.

It is a core data source for traders and for most academic research on pricing trends in the futures market. That said, it does have its critics and their issues with the report are justified. The biggest weakness with the COT is that, for a document meant to promote transparency, the rules governing it are not transparent. Due to legal restraints (CEA Section 8 data and confidential business practices), the CFTC does not publish information on how individual traders are classified in the COT reports.

Legacy Commitments of Traders Net Positions

The remaining three categories (“asset manager/institutional;” “leveraged funds;” and “other reportables”) represent the buy-side participants. These are essentially clients of the sell-side participants who use the markets to invest, hedge, manage risk, speculate or change the term structure or duration of their assets. The COT reports are based on position data supplied by reporting firms (FCMs, clearing members, foreign brokers and exchanges). CFTC staff does not know specific reasons for traders’ positions and hence this information does not factor in determining trader classifications. Note that traders are able to report business purpose by commodity and, therefore, can have different classifications in the COT reports for different commodities. For one of the reports, Traders in Financial Futures, traders are classified in the same category for all commodities.

If you started trading in the last two decades, you’ve only known a world in which the euro is worth more than the US dollar. You’d have to go all the way back to 2002 to find data points representing the EUR/USD conversion rate that start with a zero to the left of the decimal point. Although it looks disorganized, searching through the report is relatively easy.

Using the Commitments of Traders (COT Report) in Forex

As a result, a classic bullish set-up for a given market would be when large traders are net long and small traders are net short. The market will be in a weakened bullish set-up “if” the two-week trend in the large trader position is down, or in other words, if the funds are in the process of liquidating their net long position. The larger the net short position of the small trader (relative to history) and the extent that small traders are holding a position “against” the trend are factors which will add to the bullishness of the report. For forex traders, reading through the COT report might seem cumbersome.

Reportable traders that are not placed into one of the first three categories are placed into the “other reportables” category. The traders in this category mostly are using markets to hedge business risk, whether that risk is related to foreign exchange, equities or interest rates. This category includes corporate treasuries, central banks, smaller banks, mortgage originators, credit unions and any other reportable traders not assigned to the other three categories. The Commitments of Traders (COT) reports are provided by the Commodity Futures Trading Commission (CFTC). COT reports provide a breakdown of each Tuesday’s open interest for markets in which 20 or more traders hold positions equal to or above the reporting levels established by the CFTC.

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. Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance.

And if commercials are going short while non-commercials are going long, a reversal to the downtrend may occur. The report provides investors with up-to-date information on futures market operations and increases the transparency of these complex exchanges. It is used by many https://g-markets.net/ futures traders as a market signal on which to trade. Generally, the data in the COT reports is from Tuesday and released Friday. The CFTC receives the data from the reporting firms on Wednesday morning and then corrects and verifies the data for release by Friday afternoon.

Mastering the Forex Market with ICT: A Dive into the Commitment of Traders (COT) Report

It’s not about opinions or gut feelings; it’s about measurable, statistical data. It’s about asking the right questions and finding the answers in numbers. However, the original COT reports are text based and the CFTC does not provide any data analytics tools. COT reports can be obtained from the CFTC website and can be downloaded in several file formats. Remember, since spot forex is traded over-the-counter (OTC), transactions do not pass through a centralized exchange like the Chicago Mercantile Exchange.