The COT Report: What, Where, When, Why, and How
The Commodity Futures Trading Commission, or CFTC, publishes the Commitment of Traders report (COT) every Friday, around 2:30 pm EST.
Because the COT measures the net long and short positions taken by speculative traders and commercial traders, it is a great resource to gauge how heavily these market players are positioned in the market.
Later on, we’ll let you meet these market players. These are the hedgers, large speculators, and retail traders. Just like players in a team sport, each group has its unique characteristics and roles. By watching the behavior of these players, you’ll be able to foresee incoming changes in market sentiment.
You’re probably asking yourself, “Why the heck do I need to use data from the FX futures market?”
“Doesn’t the spot FX market have a report that measures how currency traders are positioned?”
“I’m a spot FX trader! Activity in the futures market doesn’t involve me.”
Remember, since spot FX is traded over-the-counter (OTC), transactions do not pass through a centralized exchange like the Chicago Mercantile Exchange.
So what’s the closest thing we can get our hands on to see the state of the market and how the big players are moving their money?
Yep, you got it…
The Commitment of Traders report from the futures market.
Before going into using the Commitment of Traders report in your trading strategy, you have to first know WHERE to go to get the COT report and HOW to read it.
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