The Commitment of Traders or COT report comes out on a weekly basis and is put together by the Commodity Futures Trading Commission or CFTC. The information it contains includes the aggregate amount of long and short positions that are held by different types of traders, including large traders, speculators and financial institutions, as well as commodity producers and commercial users like industrial manufacturers.
The information used in the COT report is reviewed and compiled by the CFTC each Tuesday, and the COT report is then released to the public after the Chicago futures market closes on Friday afternoon. While not really appropriate to use for intraday position taking, long or medium term forex traders can use the weekly data the COT report contains influence their trading decisions as early as the following Sunday afternoon when the forex market opens again
The COT report has been used by forex traders over the years as an important market sentiment indicator, and it helps them find out what positions large traders are taking in the futures market. The report also helps traders determine whether longs or shorts are too crowded to be sustainable, which would tend to make a market ripe for a counter-trend correction.
Types of COT Reports
Three different versions of the COT report are released, each of which provides potentially useful information for forex traders. The original or Legacy COT report is the most popular and has been used by currency traders for the longest period. It breaks long, short and spread position reporting down into Non-Commercial, Commercial and Non-Reportable categories.
In addition the Legacy report, two newer COT reports also exist that give traders a deeper view into market holdings by breaking the positioning information down further into additional categories. The first of these newcomers is The Traders in Financial Futures or TiFF report that breaks the non-commercial trader category down into Dealer/Intermediary, Asset Manager/Institutional, Leveraged Funds, Other Reportables and Non-Reportable market segments.
The second is the Disaggregated format that is similar to the TiFF report, but pertains just to commodities and breaks down the commercial trader category into additional groups. These are the Producer/Merchant/Processor/User, Swap Dealer, Managed Money, Other Reportable and Non-Reportable market segments.
All of the available COT reports produced by the CFTC break the observed positioning data down into that pertaining just to futures contracts and that relevant to both futures and options contracts. Traders can compute the options contract positioning information by taking the positive difference between these numbers.
COT Indicators
Forex traders use the COT reports as a market sentiment indicator to help them determine what positions the big traders are taking and to suggest when markets are overly directional. Those who have a typical trading time frame that extends beyond just intraday movements may wish to explore the COT indicators currently available to support their trading.
One especially popular such tool is the COT Indicator Suite for MetaTrader that you can obtain from the developer’s website at easyexpertforex.com. This useful indicator suite shows three indicator sets corresponding to the Legacy, TiFF and Disaggregated report types, with new data points plotted each week as the COT reports are released.
Furthermore, this particular indicator suite has five ways to show COT information for all report types on your MetaTrader platform’s charts, including a COT Totals indicator that shows basic positioning data; a COT Graph indicator that displays net long and short positions by trader class; a self-explanatory COT Open Interest indicator; a COT Index indicator that was popularized by Larry Williams and Steve Briese; and the company’s proprietary COT Pair Index that uses the net long and short positions of two currency pairs to track their combined movement.