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It confirms your long term bias in the market. There is no better tangible way of doing so. Commitments of Traders is invalid, late, old or irrelevant, perhaps this article is not for you. I truly believe there is enough evidence for you to change your mind and once you get to the bottom of this page, you will be a much better trader. Everything you will ever need to know about C.
Price is a result of buyers’ and sellers’ interaction. Many traders know about it, but just a few use it. The practical application of this comprehensive market law can be extremely useful for anyone who has ever dared to predict future prices. Fundamental and technical conditions create supply and demand. This is the only law of the price. No matter how trivial it may seem, demand and supply determine the price. Supply and demand is a basic principle in economics illustrated in the chart below.
There are many ways to measure supply and demand in the market. But Commitments of Traders is by far the most accurate tool I know. The method of the market analysis using the Commitments of Traders Report can be considered as fundamental analysis. It’s no secret that most traders use technical analysis for the real trading. This is due to the fact that fundamental analysis is often connected with the economic news release, and it’s impossible to predict the market reaction to the news because traders have limited knowledge of finance and macroeconomics. DON’T BE ONE OF THOSE GUYS! One cannot sustain profits in the long run without understanding the real forces behind the price movement.
What is the Commitments of Traders report The Commitments of Traders Report is issued by CFTC. 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. This is an essential tool for gauging long term sentiment in futures markets. Beginning as of June 30, 1962, COT data was published each month. Those original reports then were compiled on an end-of-month basis and published on the 11th or 12th calendar day of the following month.
The report breaks down each Tuesday’s Open Interest and gives us a powerful view on what exactly the big guys have been doing in the marketplace and what their plans might be. It is issued every Friday and includes data from Tuesday to Tuesday. The three days prior to the release date are not included. Simply put, COT reports give us a view into the trading books of the most influential traders in the market. Once we know what these guys are doing, it is easier to eliminate the noise, opinions and hype. Remember, the volume of money placed on one side of the market will tip the price towards that direction.
This is supply and demand in play. This is as simple as it gets. Reports are available in both a short and long format. The short report shows an open interest separately for reportable and nonreportable positions.