The Commitment of Traders (COT) Report
12/30/2008 9:52 am EST
The commitment of traders, or "COT" report, is useful, but the raw data from the CFTC can be a little confusing without some historical context. It is really helpful to be able to see the information in a historical graph rather than just the changes during the last week as shown in the report.
You can find that kind of report or graph on the LearningMarkets.com Web site under the forex tab. There are COT graphs for each of the major currency pairs. The COT report shows how committed the large institutional, "non-commercial" traders are in each pair. If traders are net short, the COT graph will show a negative position, and if they are net long, the COT graph will show a positive position.
In the video, I will show you an example of the current net position held by these large traders in the EUR/USD. The COT report is clearly useful for forex traders, but it has application across the capital markets. The most actively traded futures contracts include stock indexes and interest rates. Traders can infer trend sentiment in these capital markets through their own COT reports or by looking at those currency pairs that are sensitive to changes in those capital markets. In the video, I will provide a couple of examples.
If you are interested in doing some independent research on the COT report, you can get it free from the CFTC's Web site at www.cftc.gov. The report has a long and short format and is released each Friday. It may require a little effort to get used to the way the information is delivered, and ultimately you may find it much easier to refer to the COT report graph on the forex tab at the LearningMarkets.com Web site instead.