The Commitment of Traders (COT) report is released weekly by the Commodity Futures Trading Commission (CFTC) in the US every Friday at 15:30 Eastern Time. The COT report shows how large speculators, commercials and small traders have placed their bets in the futures markets in terms of open interest information based on the previous Tuesday, and is an invaluable tool you can use to track the market sentiment in currencies, commodities and stock indices. The only limitation of the COT report is that it is three days late, but that doesn’t mean you can’t still use it as a sentiment tool.
There are three categories of traders in the report as defined by the CFTC.
- Non-Commercial (“Large Speculators”)
These large speculators are mainly hedge funds, banks etc who trade currency futures just for speculation.
- Commercial (“Hedgers, Exporters, Importers”)
These are people who use the futures contracts for hedging purposes, and these commercial participants are generally exporters and importers who may use the commodity or currency futures markets to take a position that will reduce the risk of financial loss in their assets due to a change in price.
- Non-Reportable (“Small Traders”)
They are small speculators like retail traders
Things to Note:
- In currency futures, the convention is to quote the foreign currency directly against the US dollar. For example, the Swiss franc is quoted versus the US dollar in futures, unlike the USD/CHF notation in the spot forex market.
- It is more important to note whether the large speculators are net long or short in specific commodities or currencies. Sometimes, moves can also be influenced by small traders closing their losing positions. Knowing whether large speculators have been net long or short a few days ago only indicates the positioning in retrospect. It is more useful to compare the latest net positioning with that from the past few weeks or months.
Here at DailyMarkets.com, you can view the COT charts for free and use them for your trading. At the moment, we are only showing the net positioning of large speculators and small traders as that is the information we find most useful for trading. If you find this tool useful, please let others know and we’ll appreciate it.