Hi ForExchange,
I’m glad to hear that you are not the typical trader of these days, that you are open to trading commodities (possibly options?:)) as well.
Interpretation of the cot report: I’m not sure if I understood your question, but the following may help… the original (but hard to see) cot reports are accessible at CFTC. There are a few services that “do the hard work” and prepare nice cot charts. These are very important, since you need to see the weekly cot report in context, what changes happened in Traders positions compared to the previous week, but also what the big picture is. I believe this can be done most easily by looking at cot charts. I use cotbase.com for analyzing the report, it’s a great service, I can recommend it.
Crude Oil: 3 types of oil in the report? I don’t think so… The Crude Oil I analyze (I attached a chart for you) is the Light Sweet Crude --> the most actively traded commodity amongst energies. So when we talk about the cot report for crude oil, it is for the light sweet. The cot report that CFTC publishes may also show data on other oils as well, but what you should be analyzing is the light sweet.
Strategies: COT analysis works best – at least in my opinion – on a bit longer time frame. It won’t be enough on it’s own, you need other TA tools to be able to enter, exit trades, to do your risk and money management analysis… I always say that the cot data can be used in two ways: 1) searching for trading opportunities or 2) as a confirmation tool --> once you have built up a trading idea for a specific market, it’s a good idea to see what the cot situation is: whether or not it supportive of your idea.
“63% of the people are long with GBP and I am short” --> I don’t quite understand this… for each and every contract there is someone who is short and someone who is long. If you add up the net amount of contracts for Large Speculators, Commercials and Small Speculators, you will get 0. What is really important, is the extreme level of net positions for the different market participants, but I’ll not go into details here, since my thread explains this is details…
Just, so you see how I analyze the cot report, let me give you my view on GBP (it is actually a market, where I see trading opportunities).
On the chart below (which is a 5-years long chart – great for analyzing long term trends), you can see that there is a pretty large, I call it, STRESS in the market. All major Traders of the market are carrying extreme large positions, which as you can see, always ended the rally in the British Pound. Doing this historical analysis, we can come to the simple conclusion that the fuel in the current rally is drastically running out. I personally think (cot analysis is very effective in currencies) that prices will reach a top soon or have already reached it.
All the best,
Dunstan