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Stocks & Commodities V. 23:8 (22-23, 28-31): Commitment Of Traders Report: Demystified by Jason Braswell
Stocks & Commodities V. 23:8 (22-23, 28-31): Commitment Of Traders Report: Demystified by Jason Braswell
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Stocks & Commodities V. 23:8 (22-23, 28-31): Commitment Of Traders Report: Demystified by Jason Braswell
Debunking the myths about the COT, its traders, and their markets can help you build indicators for your own trades.
Most traders know that the Commitment of Traders (COT) essentially is a report of the open interest held by the major categories of traders. Despite this basic knowledge, there seem to be some pervasive misconceptions about the report when it comes to understanding the relationship between the market and these categories of traders. Im going to first give a quick background on the report for those who arent yet familiar with it, and then, using the natural gas market as an example, Im going to show how some common assumptions about the report dont hold, at least not for all markets. Finally, Im going to show some ways you can understand the role of each of the major players in a specific market, using this knowledge to build some useful indicators.
THE BASICS
The COT is published by the Commodity Futures Trading Commission (CFTC), and it reports the open interest, the number of existing longs or shorts, held by all the traders for a given contract. The COT then breaks those traders down into four categories:
1. Commercials, sometimes called hedgers
2. Noncommercials, known also as speculators or funds
3. Nonreportables, also known as smalls or small speculators and
4. Spreaders.
Debunking the myths about the COT, its traders, and their markets can help you build indicators for your own trades.
Most traders know that the Commitment of Traders (COT) essentially is a report of the open interest held by the major categories of traders. Despite this basic knowledge, there seem to be some pervasive misconceptions about the report when it comes to understanding the relationship between the market and these categories of traders. Im going to first give a quick background on the report for those who arent yet familiar with it, and then, using the natural gas market as an example, Im going to show how some common assumptions about the report dont hold, at least not for all markets. Finally, Im going to show some ways you can understand the role of each of the major players in a specific market, using this knowledge to build some useful indicators.
THE BASICS
The COT is published by the Commodity Futures Trading Commission (CFTC), and it reports the open interest, the number of existing longs or shorts, held by all the traders for a given contract. The COT then breaks those traders down into four categories:
1. Commercials, sometimes called hedgers
2. Noncommercials, known also as speculators or funds
3. Nonreportables, also known as smalls or small speculators and
4. Spreaders.
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