Hi everyone (especially Mike and rookie),
I start now a new series here, as you guys are busy with your own analysis and work, I thought I write here down my own thoughts about my first COT book as I read it. I write down anyway always for myself what I think is important to look it back later, so I decided why not to post it here. Important: I write down the own words of the author, in the right order as it comes in the book. However I will not structure the different thoughts and do not write down which pages they were. I just want to mention the sentences which I find important for myself. This is not the same value for you as reading the book (hopefully you will all read it when you have the time for it), however it is better than nothing. I also make my own summary in the end of each post.
“Watching the COT report, you can see when the trade forms a consensus that prices have moved too far away from fundamental values, or find out when the hedge funds have all piled into one side of the market and are about to have their hat handed to them.”
“If large non-commercials are overwhelmingly long, look for a long trade: look to go short if large speculators are net short. He (Larry William) specifically warned against using the Commitments report for trade timing.”
Spreading in the report: “the spreading figure represents the extent to which each large speculator holds equal long and short positions. Any excess is listed as either short or long, as appropriate.”
Percentages in the report: “The drawback to using these percentages is that teh spreading total is included in the calculations. In other words, the long percentages across a row will sum to 100 percent less the spreading percentage.”
Summary: the first part of the book was about the history of the COT report. I like history, but I do not write too much about it here, as it is for our goal not the most important thing. Then there was a page from the COT report and explained what the different numbers mean. From this part I took out the definition of the spread and percentages.
The last part of very interesting though, and we never talked about it! It is basically about the different forms of reports. Here in babypips.com they suggest to use the 1. Futures Only, 2. Chicago Mercantile, 3. Short-form report. Somehow I never thought about that it is even possible to use any other kind of the COT report (as I use this version).
This means we share here weekly our findings and it might even be the findings of 3 different reports!!! Briese writes that the actual numbers are very similar in the Futures Only and Futures-and-Options Combined report, still it is important to know which one to use. He uses for example in his entire book the Futures-and-Options report (not the same as what I use). I am very interested now if he uses the long or short form and if he uses the Chicago or New York version. He did not tell the last two “settings” yet. But for sure it would be good to know what all of you use out there!
Have a nice day!
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