Why should you follow the commitment of traders report? Also known as the COT, this report provides key information that allows individuals to get answers to their questions. It breaks down the open interest for all of the traded futures contracts into both short and long positions and by each type of player. In the market, this information can be of value to you.
Often, the most recommended people to watch listed in the Commitment of Traders report are those known as commercials. Commercials are considered the best to pay attention to because they offer the everyday trader key information and clues as to what is happening in the marketplace.
Each week, after the close of business on Tuesday, the Commitment of Traders data is gathered. From that point, the report is published after analysis of the data on Friday. To find this in a text or in a spreadsheet format, simply visit the website of the Commodity Futures Trading Commission.
This report will tell you a great deal if you take the time to analyze it. For example, in some analyses, there is evidence that those commercials in the market tend to spend a lot of their time hedging, which is the process of going short when the market rises. On the flip side, those who are non-commercials in the report, such as those large hedge funds, often do the opposite of what commercials do and they follow the trends more closely. You will find this particular pattern occurring in all Forex markets and in all commodity markets.
Further analysis of this data offers a look at strong trends in the data from the Commitment of Traders data. When you notice a strong trend developing, the commercials in the report often flip from hedging to trend following. You will notice this particularly in the S & P futures. Why should you use this particular type of report? In short, it is a good option for confirming the overbought and the oversold levels. It can also help to identify potential market turning points, a value to any investor.
The key information provided by the COT report will give you the answers to questions, allowing wise trading decisions. The value this provides to traders means that you can maximise profits and increase the success rates of your trades. Adding the COT report to your trading resources is well worth looking into as part of your trading toolkit.