COT Report Analysis - a thread on market sentiment

Trading Discussion News and Economy
3577

Hey BB

Comparison.
Running history.

All data collected is relative. Relative to one another. You would need to keep track of how they all relate to one another. Finding how one currency is stronger than another is one thing. But, when you keep track of that, then you should be able to see strengthening, or weakening. It’s all about seeing the flow.
It’s just like the trend thing. When the ball gets rolling, it will most likely continue that way. And then also change happens. Things don’t continue like they were going. (We all know this)
But the point is when you keep track of numbers like this, you should be able to see change. Or in fact, the trend. And naturally what we want to do is to take advantage of the trend. Trend is human nature. We are creatures of habit.

You have to come up with your own method of comparing.
See the trend. See the changes.
Put it all into the proper perspective. From how far out are you looking at the field.
You will see it’s just like the charts. The closer your in, the more things change. The farther out then the more consistent the patterns are.

I do it because it’s fun.
And because I know I can always go back and do my own backtesting tests.

Mike

3578

Thanks, Mike!

I think I understand. I’ll expand my CS database further back in time to see the flow you are talking about.

3579

Hi Peter,

I don’t know if its got to do with different brokers but I’m getting different numbers.

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As for day trading the pair I would have went long at the first NY candle close assuming that EURUSD bottomed at 1.1300 would have made 50 pips on that long trade. What do you think about this method ? Its a 30m chart by the way.

3580

Hi BB,

it is time for me to go back to the roots. I downloaded the COT report and started updating my database. I have to say my update takes a lot longer time than creating a completely new table. Updating Silver itself I believe it took 1 hour. Usually when I updated my template every week then I just had to copy just the lost line, now I have to always sort everything to dates. Is it normal that my updating is so much time?

I thought I shoot up all my tables on silver, maybe you can compare to yours, I do not want to make mistakes.

More than that, I have a little problem with the lookback period, would be good if you could help there. For Net positions and Open Interest I remember we used 3 years. For the other 4 indicators I need your suggestion though. The beginning of my charts show the values from where you started your tutorial, but I am sure there is a lookback period we should use like 1 year, half year etc. Please tell me what is the lookback period for the COT Index, Willco, Commercial Movement Index and CP/OI.

I also make a short summary so you can tell me if you interpret it the same way:

Net Positions: nothing
CP/OI: Commercials short position decrease while the long position remains the same. Now I would as you what is your take on this?
Open Interest: nothing
Willco: the value is in the middle of the scale so also nothing
COT Index: just like Willco
Commercial Movement Index: just like the above two

I would be happy to see some other analysis.

Thanks,
FE

Silver

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cot commercial movement index.jpg700×250 25.8 KB

3581

Hi guys!

As I promised, I finished the Pair Strength Indicator. From now on, you will be able to see the performance of the most actively traded currencies, namely the EUR, USD, CHF, GBP, JPY, CAD, AUD and the NZD. I also have the indicator which displays the raw numbers used in the Relative Strength calculation. If I am not mistaken, Mike uses the same method.

1.jpg700×543 48.2 KB

The upper indicator represents the raw numbers, while the lower displays the True Strength of each currency. I’ll probably publish the indicator, so you guys can get it if you are interested.

Edit: I’m working on a formula by which I could measure the rate of strengthening / weakening.

3582

FE, I usually check TradingView for the COT report. You can find Commercial, Noncommercial NPs, COT Indexes there with customizable variables.

3583

Hi BB,

this means you do not even update your data anymore?

In the beginning one of the reasons I wanted to have my own database was because Timingcharts and Oanda had mistakes, did not have many instruments and also not too many COT analysis, only COT Index and Net positions. I am not so familiar with Tradingview´s COT Report, maybe you can say some more about it.

However as I still want to do my own analysis, it might be good if you could still tell your own opinion about the lookback period and how you find my short summary on silver.

Thanks,
FE

3584

Hi Rookie,

Probably more to do with time - I use 12.00gmt to 6.00 gmt and look for the high/low within those hours.

Yeah, I saw the bottom forming on Friday, but I would seldom open a trade that late in the week - I did suspect that price would head back to the mid Asian level that I had spoken about earlier which also happened to be Friday’s mid Asian as well, so I was sorely tempted.

(it bounced off Tuesday’s mid Asian btw)

3585

Hey guys.

Well, I had a good week, as you already know. I didn’t open any more trades since my last post.

I opened 6 trades.
5 closed — +500 pips
1 still open — (+90.5) at present.

But I am in such a frenzy. I will talk about it in a minute. But, I have a feeling all you guys really think I am just nuts. But, if you please, can you listen to me? Look, I have no one else who listens. This is very important to me. I would like some feedback. Or else I’m just gonna continue to post this stuff and get it off my chest anyway.
I know the way I trade is not in compliance, agreeance, proper, and against all written rules you and everyone else abides by.
Yes…I’m talking about the 100 pip take profit, 200 stop loss. But the data keeps on coming in as profitable.
But I got really moved this week. Sure, I already put out there MY trades results. But, as I have stated many times already, I keep track of this system. At the open of every week, if I go with all my trending highs on the weekly time frames, what’s the results ( 100 tp, 200 sl ) . And the numbers for this week are this.
15 fresh trades. Every one of them took profit.
1 still running trade (opened from 3 weeks ago) took profit.
4 still running trades (opened from 1 week ago ) still running now.

And the total trades opened and closed results, from the month of April to date is this.
148 trades.
108 winners
40 losers

  • 2700 pips
    72.9% win rate

Look, I am getting more and more antsy here about the results. Cause my discretionary trading is surely not any better than those results.
And to talk about why are those trades taking? I think it has to do with fundamentally whether the field is keeping with the trends or not. Do you agree with that synopsis? So, if that it true, then wouldn’t I want to keep track of the field and have a way to determine whether the field (which is just every currency collectively) is on track or if there is change happening? Or the other question is this —is the currency market by nature mostly a trending market? Cause if it is, then I just cannot lose with this system.
Ok, maybe someone can objectively say that I just don’t have enough of a data set. Maybe we’re in a good season for this system. There is many real good trends going on now, huh.
But, I know one thing. At least I’m on the right track. And that would lead me to be thinking of making some adjustments for refinement. Like what’s been going through my mind is about the exact number of a take profit, and stop loss. I’ve been thinking of finding out the weekly, or daily high/low ranges for each pair. Ok, I did find a good table for that. FE, I showed it to you, it’s on the ForexStreet web site. But then I got to thinking, …now what? What would make more sense? The higher the ranges are the better of a result? Or the opposite? I just can’t figure it out, what would make knowing the ranges more of an edge in my favor.
Well that’s what I’ve been thinking lately.
But, to back it up a little bit, you can’t argue against some positive numbers already seen. Did I just get so lucky in picking the 100/200? And against the back drop of the weekly time frame time table?

Well, thanks for listening, reading.
I am by no means putting any of this on you. To try. To agree.
But, I would appreciate any input on an objective basis.
Philip…you have expressed that this is against your religion. It’s personal I understand. But, does that mean you can’t give me any constructive criticism within the confines of this system? I guess I can understand you can’t if you haven’t ever put thought within this arena. So it would be foreign to you.

Well, I at least feel better getting all this off my chest.

Ok, how about this? Are your guys systems doing better?
I’m up 30.7% from the beginning of May. But, that’s with the second month with every trade bumped up to a 2k size.

Thanks
Mike

P.S. I just bought another book. Am very excited about this one!! Called ‘Trade Mindfully’ by Gary Dayton (Wiley) ////Achieve your optimum trading performance with mindfulness and cutting-edge psychology.

3586

wouldn’t it be create if the Chicago Exchange offered an API which you could tap into, so you could use a program to extract the COT data…

3587

Hi Guys,

earlier when we analysed COT, we distributed all markets between BB, rookie and myself. I finally updated the 7 markets I followed: silver, crude, soybeans, EUR, NZD, RUB and JPY.

Here are the findings I found interesting to mention:

[B]JPY[/B]: it is almost at a net extreme position. We either should see a pause in the trend until the bulls load up again or a reversal comes. Anyway, JPY should not weaken much.

[B]EUR[/B]: probably the most discussed currency. Clearly a net extreme position was reached, commercials are continuously selling, non-commercials buying. This was the very last confirmation for me about EUR strength, for me this topic is decided. Only thing to mention the COT Index will reach an extreme level soon which means a retracement in EUR positions will be in place.

[B]NZD[/B]: now here it is interesting to see the very fast movement away from the net position extreme. An NZD selloff is still in place but the “money falling in your hands” time is most likely over, we have to tighten positions.

[B]RUB[/B]: important is that Commercials are increasing continuously their net positions since the end of March. This indicates to me that in the background there is again more trus in Russia.

Ok guys, what is your take on the COT Report? Peter, I tried to bring Fundamental story out of the numbers, please comment what you can confirm and what not.

Have a great weekend team,

FE

3588

These are good results Mikey. So you shouldn’t be upset withit. You should start up a myfxbook account. Then check what your risk of ruin is. Only then can we have a proper assessment of the risk you are taking with the system.

I do not understand your conditions for an entry.

3589

Nice! Just a thought Mike, did you check whether your closed winning trades would still be winners if you had risked, say, 100 pips?

3590

FE, I’ll share with you the COT report on TradingView tomorrow.

3591

Mike, yes, if you are thinking about the SL aspect of the approach, I believe that you are using SL for what it is intended - to stop a loss, clearly your focus is on the profit aspect of each trade.

The general advice from the experts is that SL is to be used as some sort of greater plan of ‘managing’ risk, or ‘managing’ a trade or ‘managing’ money.

Some guys do this, including myself, but for me only after I get a position going, but if I’m day trading, meaning that I am looking for a specific profit (might take 2 or 3 days, or 1 day, but my definition of ‘day’ trading means complete exit) then SL is not managing anything, it is just to exit a losing trade.

There was a guy who used to be on here took trades, using fundamentals, with a 500 SL and a small TP, forget the amount of TP, but very much smaller - he would exit before the SL hit only if the fundamentals changed - if I remember right he took 1,000 to 10,000 in a few months.

The moral of his story was simple, if the probability of hitting the TP is greater than the probability of hitting the SL, then the TP will win.

I remember some time ago a trader saying that the SL should represent confidence in the trade, the wider the SL then the greater the confidence - but always a SL, he figured that we cannot be 100% confident.

Philip is right about risk of ruin, although if the leverage is right then that risk can diminish.

3592

Apologies to Philip, didn’t realize that you are discussing day trading over on your thread, btw good thread so I will link to it if I may:

http://forums.babypips.com/free-forex-trading-systems/72042-most-profitable-trading-pattern-you-will-ever-encounter-125.html#post707109

3593

Yeah I just started that after a lot of research on the subject. I will continue the 5 minute strategy in a number of hours.

Back to your opinion on Mike’s stoploss, I personally agree with you (and Mike) that a wider stop loss gives more way for a higher winning percentage. The problem I faced, and may be you guys can help me , is how do you determine the lot size. I work on a “worst career loss” risk, which is that my stop loss is 2100 pips on every trade. If I lose it I lose my entire account (of course that’s different than my exit strategy, this is a lot size measurement). But now if I’m going to have a maximum of 200 pips, it implies I will trade much more than I do usually (to compensate for the 100 pips target). So how much would I risk per trade?

Because to me 1% seems quite a lot. Mike took 6 trades, is risking 6% a week too high or ok?

The second problem is drawdown. See there is a direct relationship between winning % and risk to reward. I don’t remember how its expressed mathematically but I know that in Mike’s case, he must have a 70% winning system just to stand a chance at winning profit.

Example: Let’s say he has a 70% winning chance and Mike will take 10 trades. His starting capital is 10000 pips.

He wins seven and loses three as expected. So (7100)-(3200)= 100 pips. So despite having a 70% winning system, Mike would only make a (100/10000)*100= 1% profit on his starting equity. And this is in the best possible series of trade. If he was trading more as he wins and less as he lose, he would make 1%

Because now let’s assume he is going to take 20 trades, but this time he will string the six losers first followed by the 13 winners. He has $10000 account and risks 1% to get 0.5% and trades more lot sizes as he wins and less as he loses.

First six are losers:

  1. 10000-(10000*0.01)=9900
  2. 9900- (10000*0.01)= 9801.

If you run this formula over Excel you will see that over the course of 20 trades with a 70% success rate but six consecutive losers first, Mike would have made a profit $45.56 at the end.

That’s why I became sure of this theory. Because now with a system that only wins 40% of the time but has a reward double the risk. If Mike takes 20 trades and hits 12 consecutive losers and only the last eight winners, he would have made a profit of $181.78.

Now a 30% winning system with a reward three times its risk would have made $478.06 at the end of the same period in the same sort of drawdown.

So my little Excel game (and I did these tests with my own system as well) tells us that Mike’s 70% winning system with 1:2 risk to reward is the equivalent to a 25% winning system that yields 1:4 risk to reward.

But I guess its about Psychology as well. For me I feel its a lot easier to produce a strategy that wins 40-55% of the time at a risk reward 1:2.5. But may be for Mike he feels more confident in his own way and so performs better.

3594

Guys…

Thank you!!

Peter— now that all makes so much sense. You have put it all into perspective for me. And have explained that very thoroughly. And of course your right. Your experience in this field shows. I appreciate that.

Philip—very good point about putting it on myfxbook. I tried that some time ago, and then retried it again. But I never got off the ground in there. I don’t know, for some reason I just don’t like that site. I think it’s an awesome idea to have all the data available from your trades. I would love to see the risk of ruin. Theoretically speaking, sure.
Maybe I’ll try to give it a go again.

BB—Well I haven’t gone back (although I could) and looked at exactly what would happen if I went with a lower sl. But I can tell you that there have been many many trades that have moved way higher than 100 pips, even close to the 200 mark, and then came back down.

The conditions for the trades are this. My determination of who’s trending high on the weekly time frame.
I will have around 15 to 20 pairs or so. Then at the open of the week, (as soon as possible) set the trade, with the parameters in place. Then let them run till one of the two limits take.

Well once I get my line up this weekend I shoot it out there.
And I’ll track them on here for you to see.

Thanks for listening everyone.

Mike

3595

Yeah, Philip, I’d say that maybe this is why so many guys say that trading is such an individual thing.

Numbers are irrefutable, the scenario you have painted has caused much research and debate over the years, and doubtless will continue to do so.

The Risk/Reward formula would seem to many new traders to be simple, keep the risk low and the reward high, and then perhaps use maths to help formulate a strategy to that end.

I’ve seen guys on BP who are avid followers of statistics, for them what has happened in the past will repeat, and so it happens.

I’d say that maybe why I have taken to this thread so much is that it stimulates thought, and as Williams says - this is a thinking man’s (woman’s) game.

3596

Hey guys.

Ok. This is what I got. This is my list of who’s trending high against who on the weekly time frames. So there’s 24 pairs in total, but 4 pairs are still running (that means their begin price is not this weeks open).

[B]CHF[/B]/////[B]GBP[/B]/////[B]EUR[/B]/////[B]USD[/B]/////[B]CAD[/B]/////[B]AUD[/B]/////[B]JPY[/B]
NZD/////NZD/////NZD/////NZD/////NZD/////NZD/////NZD
JPY//////JPY//////JPY//////JPY//////JPY//////JPY//////
CAD/////CAD/////CAD
AUD/////AUD/////AUD
USD/////USD/////USD
EUR/////CHF

You can see the top line is who’s trending high, and underneath them is against whom.
I keep track, but just so you know, these 4 have another starting price. And where they are standing at this point.
EUR/CHF—1.04404 (+22.9)
CAD/CHF—.75173 (+41.8)
CAD/JPY—100.672 (-74.0)
AUD/JPY—95.564 (-26.6)

I want to talk about this a bit.
First of all, I haven’t traded this set up yet. I just have been keeping track of the results. And that means from the open of the week, all of them put on, and find out the results. What I have been doing is picking certain ones, at some time during the week.
Discretionary style. But, I’ve always had a list like this and pulled from it.

Now this is what’s going through my mind this week. And about this system.
You can see how heavy the Majors have the field. So, what will happen if the Comms make a comeback? I’m screwed big time.
But then you have to think about this. If I go in with all of them, wouldn’t I be hedging to some degree? That will surely help.
And let’s remember what I’m up to. And that is just looking for to grab only 100 pips on each pair. With a 200 pip parameter for that. So, surely the odds should be with me given the fact that 100 is closer than 200.
And the question will be also what the sentiment will turn out this week regarding the entire field. Will it remain the same which is the Majors dominating? I’m starting to wonder about the JPY each and every week now. In fact, I thought about that very same thing last week, but what happened. Nothing. Every trade last week was a success against the Yen. Plus I’m only in it for 100, not a long term gain.

So, that’s some of what I’m thinking.
Any input?

Mike

BTW…my position size is 2k per whatever and how many trades I take. This month. Which I am in the second month. (First month was all 1k sizes.) And my monthly end goal is to have 2000 pips. I’m at a total of 2,691.3 pips now. I have to keep that in mind. But I also want a cushion for next months goal also.