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The Commitment of Traders (COT) report is a weekly report issued by the Commodity Futures Trading Commission (CFTC) that provides insights into trader positions in the Futures Market. It helps traders understand market sentiment and positioning of different market participants.
What Is the COT Report? Published every Friday at 3:30 PM ET (for data from the previous Tuesday). Breaks down the open interest (number of outstanding futures contracts) held by different trader categories. Covers a variety of futures markets, including commodities, currencies, stock indices, and interest rates. Categories of Traders in the COT Report The report classifies traders into three main groups: Commercial traders hedge their business risks—when they buy, it may signal market strength; when they sell, it may indicate weakness. Large speculators (hedge funds) follow trends—if they are heavily positioned long or short, it can hint at future price moves. Retail traders (small speculators) tend to be less predictive of market moves. How Traders Use the COT Report 1. Identify Market Trends If large speculators are increasing long positions → Bullish signal If large speculators are increasing short positions → Bearish signal Example: If hedge funds are heavily long on crude oil futures, it signals strong buying pressure and a possible uptrend. 2. Spot Overcrowded Positions (Reversal Signals) Extreme long positioning → Market may be overbought (potential reversal down). Extreme short positioning → Market may be oversold (potential reversal up). Example: If speculators hold a record number of long positions in gold futures, the market might be near a peak and due for a correction. 3. Confirming Breakouts & Trends If a market breaks above resistance and large speculators are adding long positions → Confirms a strong uptrend. If a market breaks below support and hedgers are reducing shorts → Confirms a bearish breakdown. Example: If wheat futures break out above a key price level and the COT report shows increasing long positions from hedge funds, it strengthens the bullish case. 4. Hedging & Risk Management Businesses use the COT report to adjust hedging strategies based on how other commercial players are positioned. If commercial traders are aggressively buying, it may signal strong demand, encouraging other hedgers to enter. Example: A soybean exporter may increase hedges if the COT report shows rising commercial buying activity. Where to Find the COT Report? CFTC Website: https://www.cftc.gov/MarketReports/CommitmentsofTraders/index.htm Trading platforms and financial news websites also provide simplified COT charts. Key Takeaways The COT report reveals market positioning and sentiment among hedgers, large traders, and retail investors. Traders use it to confirm trends, identify reversals, and gauge market strength. Extreme positioning can signal potential market turning points. |
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