The Commitment of Traders (COT) is a weekly report published by the CFTC. It provides the positioning of traders in futures contracts such as currencies, commodities, and cryptocurrencies. The report is published each Friday and represents the breakdown of positions for the week ending on Tuesday. The COT data can be used as a long-term sentiment indicator of the market. It shows the ebbs and flows of the trades and helps you to feel the pulse of the market.
The COT report has 3 reportable groups: commercial traders known as "hedgers", non-commercial traders known as "speculators", and non-reportable traders known as "small speculators". It is considered that the data on non-commercial traders has the highest predictable value as this group is represented by hedge funds, commodity advisors, and other large speculators. It's also insightful to understand how extreme their position is relative to the past. Extreme positioning of non-commercial traders can be an early signal of an upcoming reversal.
There are 3 charts that help you to analyze the positioning of speculators:
- The chart at the top shows the net positions with the weekly price of the instrument
- The chart in the middle shows long and short positions separately
- The chart at the bottom shows the 5-year percentile of the net positioning
The 5-year percentile chart can be useful to understand how extreme is the current positioning of traders. The percentile is calculated as the net position relative to the total open interest. The percentile shows how extreme us the net position relative to the most bullish and the most bearish net positions over the last 5 years.