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How I use the Commitment of Traders Report

12 Years ago | December 31, 2013 1/28/23, 12:00 AM

By John M. Bland

There has already been an open letter sent to the CFTC by Jay Meisler citing the flaws of the Commitment of Traders (CTT) Report. I agree with them all. There is no reason with current technologies that the COT Report cannot be published daily with  periodic revisions as needed.  Nevertheless we are stuck with what we've got.

Personally, I am surprised by how little positions change from week to week. I use the data as a measurement of sentiment and as an overbought or oversold indicator. I get uneasy when longs (or shorts) far exceed shorts (or longs). I have no scientific measure of what constitutes an overbought or oversold condition, but my rule of thumb is a two to one ratio of longs (shorts) to shorts (longs).

I have discovered a useful leading indicator of net longs or shorts that I use.  For EURUSD and some other currencies, net positions tend to be highly sensitive to a cross-over of spot vs. the twenty day moving average. (See chart below). Note the longer the time span between a crossover the more significant the event. After a crossover, the tone of the market usually changes. The advantage to this leading indicator is that you do not have to wait for the latest COT data to be released.



I would love to hear any comments you have on my approsch or what you have to say about the COT Report.Contact Us

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