Hi rookie,
sorry, what abbreviation is TF?
Good that you are so patient to wait for the right entry points! For USD/CAD it looks like a good entry point now. I entered it. Both CAD and USD reports came out good, but CAD is winning until now. However in this risk off sentiment it is hard to believe for me that they can hold on to these gains. CAD gained about 40 pips vs USD in the last hours. It would be great to get at least these 40 pips!
Good luck with your setups!
[I]I continue now a new series here, 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.[/I]
[B]Chart Pattern Validation[/B]
An important element to monitor is net position extremes. When net positions reach a net long record, it is a good sign that buying capacity may be exhausted. Similarly, a net short record indicates likely selling exhaustion. This is a stronger rule for funds, than for commercials, whose deep pockets and offsetting cash market position mean that their capacity is extremely elastic.
The strength of the COT data is not identifying major bottoms and major tops. If you need a signal to take profits near the end of a move, the most help you might expect from the Commitments report is this: If funds are holding a near-record net position in the direction of the current trend, it is a time to tighten your trailing stop.
Movement Index surges identified minor trend tops and bottoms, indicating a potential sideways trend. (Minor signals should only be effective in the direction of the main trend; therefore, if both buying and selling surges seem to show effect, it mus be a sideways trend, or consolidation.)
[I]Top formations[/I]:
Commodity and some other futures markets tend to top faster than they bottom, and with much higher volatility. But they are worth and extra effort to catch because they typically retrace the preceding bull trend in a much short time frame. There is a fundamental principle of Commitments analysis that had been hammered home in more than 25 years of using the numbers: When you see an abrupt reversal in trader sentiment, anticipate a reversal in the current price trend, regardless of the the direction of the COT signal. I view a trend as a search for balance between buying and demand and selling supply. If tehre is a sudden and dramatic about-face in the view of the market participants, it is likely that the current trend has overshot. Minor COT buy signals during bull trends are highly reliable signals of a correction ending and another rally attempt about to get underway.
[I]Continuation patterns:[/I]
Flag or pennant formations are standard consolidation patterns in a long-term trend. The COT Movement Index can be very useful in pinpointing bull flag lows. A failed signal can be even more useful then a valid signal.
[B]Getting Technical[/B]
[I]nothing to write down[/I]
Summary: If you like to watch chart patterns then chapter 10 is for you (Chart Pattern Validation). There is not much to say, there were basically chart pattern examples in the book, what is important I have already written down above, of course it is better to see the charts visually. As you can see I did not write down anything for the getting technical chapter. It was basically a bit of comparison with combination of the different indicator [I]vs.[/I] Cot Index and how the work [I]together with[/I] the COT Index. As I see, Briese is mostly impressed with the RSI-Cot Movement Index combination. I think this chapter was maybe a bit interesting to see that some people might think about such wierdo combinations. Of course it does not mean at all that these indicators are bad, but I think you have to be an expert and analyse COT for a couple of years to start interpreting and inventing indicators on your own (as you have to make twistes of course to find the right combination of settings). With this chapter I finished Part I. in the book and with Part II. comes the second half.
Hi rookie,
it worked out good for you that you were more patient with USD/CAD entry. At the moment -30 pips. Other 5 trades worked out good today but not this one. I am looking for good possible long entry levels still for the USD/CAD. I do believe that we only see a correction. The question is how big of a correction.
Share it where you want to enter the market.
Hey FE!
I meant time frame by TF I trade from daily TF. Youâre right there seems to be correction going on with USDCAD daily I will enter at the end of the correction midway through a trend continuation. I expect a move a bit further down before price picking up. Iâm not sure if I can place a trade with USDCAD this week itâs always good to look at COT data before going in the updates! anyways. A little bit more waiting shouldnât do any harm 
Hi guysâŚ
Wed. results.
AUD: +5 0 2
CAD: +4 0 3
JPY: +4 0 3
NZD: +4 -1 2
CHF: +3 -4 0
EUR: +2 -5 0
USD: +1 -6 0
GBP: 0 -7 0
So, the comm dolls took it by a lot. +12
I think itâs been so interesting. Everyday so far itâs been either one way or the other, by much!
Monday: Comms +10
Tuesday: Majors + 10
Wed. : Comms +12
So, if you guys remember our talk on this past weekend about the split coming up for this week. We do have been seeing the majors on a roll. But so far this week its back and forth with no one really running away with it. And I mentioned that the majors took last week by much ONLY in the last 2 days. (which doesnât weigh on them being dominating).
Anyway, I just wanted to remind us of our past thinking on the subject.
Well, we do have some huge news for the AUD coming up in about one hour from now. This could be the tipping point for the split.
BTWâŚI donât know what open/close your broker uses. Mine is called the âlondon openâ. Hope all this helps you anyway.
Mike
Hey Mike!
I hadnât realized that there was big news coming up for AUD and it was a lot worse than expected with - figures. Both of my AUD trades are in loss now one over 100 pips. Iâll hold them regardless until it hits my SL. It makes sense to have a portfolio now I see you canât keep avoiding news releases like these and the only way âI thinkâ to combat this and to be consistent is a portfolio. Lessons learned. With that bad numbers australian economy might be in trouble. No more bullish AUD. Weâll see this fridayâs COT numbers!
Watch out for AUD trades Mike and have a good day!
Hi guys,
I havenât read your posts yet, I will do it soon and reply to them. I just thought I share my morning thoughts after seeing what happened to the AUD a couple of hours ago. Well besides my AUD/JPY short gained some nice profits I thought I do not have any strong currencies at the moment besides the USD. This is funny as in the beginning of the year USD was the beat up currency and it was obvious to trade GBP, NZD, AUD and even the EUR vs. the USD. CAD joined the group in the spring. Now if I want to see good trading setups I basically want to trade the USD across the board, but on the opposite side, going long with it. There are only some corrections vs. the USD but they do not change the trend. This gives me 2 problems with [I]my own[/I] strategy:
I am getting more and more [I]USD dependent[/I]. It gives me a lot of risk to trade all these USD pairs. If a bad report comes out from the US it involves all my trades.
I do not see good [I]cross currency pair trading options[/I] which would reduce my risk. I do not want to trade some pairs only for the sake of trading. As Mike agreed often, goal is to find strong vs. weak currencies. Well, I do not see strength in crosses now. If I enter a EUR/GBP or AUD/NZD regardless the direction I do not see the chance for a significant gain. Looking at two weak currencies the question is only which one is weaker⌠Not the best setup.
I am waiting on your thoughts on this issue.
PS: rookie, this might be now a good option to jump in at this moment for a long USD/CAD trade.
Hey FE.
I understand. With my portfolio methodology I deal with the same thing. But, lately itâs been with the EUR and CHF. My portfolio will be heavily short them against the others who are trending higher. But, the basis of my strategy is following the trend. And I take all those who are. And then itâs important to keep track of the trends. Cause when their not trending, I donât want to be in it. So anywayâŚmy portfolio will look like that. Just like you are dealing with now. But, whatâs then the problem? It goes both ways. If thereâs a big correction, sure, there goes much lost pips. But on the other hand, if the market is going that way, here comes the pips.
So I guess you have to see what your underlying strategy is based on. For me I have to lean on the fact of the trend. Flow. In accordance to the time span of the trades. And if it is favoring someone, then I must go with it. Cause itâs the market telling me what Iâm gonna do. Not me. If you just want to hedge for some balance, Iâm sure thereâs a pair or two for that. I would start with looking at which side your on. Majors or Comms. Ok, so itâs the Majors, (USD). So how about looking at CAD pairs for a hedge. Well, this in itself is a good conversation. For everything being so connected, Iâm sure there are possibilities. We should be talking about some specifics.
But to get back to my point, I would like to know your strategy fundamentals. Is it strong vs. weak? Mine is trending. There is a difference.
Hi Mike,
good answer. With CAD you are right I guess. If I have to choose any of the Comms to go long, well it would be for sure the CAD.
And yes, I always trade like this (it is my strategy):
I guess the difference is that you are long-term trading these days and I am daytrading/scalping. I try to especially trade the negative bounces on the USD as I think it bounces back these days. With your strategy a bad news does not matter, because it does not change the trend afterall. The principe is similar though.
Hey Rookie!
Yep, I took a hit overnight with 2 AUD pairs. Good thing I had stop losses in place. It was 41 and 40 pip losses.
And now there not trending anymore. They crossed the line. EUR and CHF. Itâs gonna happen.
Like I said to FE, itâs the market that will tell me if I should be in on anything. And the market is saying AUD is not now. I only had the AUD trending against EUR and CHF. Well, not now. I always have a line drawn where itâs not gonna be trending anymore. Also I need to remember that Iâm trading on the longer term. So the only thing Iâm doing is watching the trending/not trending line. And on the other hand, if thereâs more legs (good thing) to a trend, then I will add position size to it, with moving stop losses along the way.
All I can do is hope that the market will be more trending than ranging (back and forth).
Hang in there Rookie. Letâs let the market tell us what to do.
Mike
Hey buddy
One of these daysâŚ1,243 days to go (no lie) I will be fortunate enough to do this full time. I envy you so much to be able to day trade. I always thought that I need different strategies for when that time comes. Like you now. But, I cannot yet. I havenât given much thought to that type of trading, (trying so hard to get things going this way, with a day time job). But it seems like your doing the right thing. I always read the analysts saying things like âwaiting to buy on dips, selling the ralliesâ. ManâŚyesterdayâŚif I was day trading, I wouldâve been in with JPY during the day. They were on a roll. (kept seeing that when I could check in on the market). Well, someone always seems to be dominating for some period of time. I know, we just donât know for how long of a period that will be. That reminds me a few months back when I went on vacation. Stayed home. Did some day trading that week, (first time). WowâŚI lost big time. I just didnât put much time into researching the daily movements. Talk about frustrating. The one thing I remember thinking was that it seems like everyone had their chance. Was like a circle. I watched the big picture and every currency had their turn. A good run, on all the others. "itâs so and soâs turn nowâŚwowâŚnow itâs so and soâs turnâŚ
Thatâs tough.
But, one of these days. I will be there.
Canât wait!
Mike
Hey guys.
Something else I find very interesting. Concerning the Major/Comm split.
I remember reading concerning the risk-on/risk-off scenario. GENERALLY if you look at the AUD/JPY pair, that will boil down that scenario. If more risk-on, then AUD will be higher. If JPY higher, then itâs more risk-off. Makes sense. Now, I was looking at the correlation between that pair and the Major/Comm shake out. Daily candle correlation. And what do you know, it, most of the time, matches. If the Majors are on top, then JPY will be higher, and conversely holds true. BUT, not all the time. So then I looked at AUD/USD correlation to the Major/Comm. Now that seems to be MORE correlated than the other pair. It matches up so much.
You can see, looking at that pair this year so far, how the Comms have been doing relative to the Majors.
ThereforeâŚwouldnât it be a good idea to be analyzing that pair? Things like the trend, support and resistance levels, and other dynamics that we can glean from that. I donât know, maybe overbought oversold conditions? Momentum? (I donât really look at charts that way.)
So Iâm just wondering if that will be any kind of edge in determining who will come out on top. And then therefore determine who, within each camp, will be the strongest.
Just stuff to think about.
I am.
Mike
Hey guys!
I had AUD going against EUR and CHF before the news came out everything looked fine. I didnât check on economic calendar thinking it shouldnât matter well I was wrong big time. AUD data came out very bad. But I was still hoping AUD would bounce back from losses and at least go one more leg against EUR and CHF but the opposing candles broke through the level that I thought would hold them. Iâm out.
I agree with FE for now it seems like USD and JPY , CHF is doing well and it doesnât make sense to trade crosses.
I lost hope with comms especially after such bad AUD data. The economy seems to be slowing down. That should have an effect on NZD and in top theyâve got their problems fonterra dairy price slump. As for CAD crude oil price is down and USD is riding high. Comms are either neutral or bearish especially if youâre trading long term.
But beware with USD as well as tensions rise between Russia and US , Eurozone gold price is picking up. USD and gold prices are inversely correlated. So the best bet would be JPY and CHF I guess I mean they seem to be bullish for now until political instability cools down and who knows how long this should take. But again this a very long term view. If youâre day trading or scalping thereâs a lot more opportunity and you can dismiss all these like Mike said everyoneâs got their turn on short term.
Do you trade full time FE? Well I want to be there myself someday soon :). But itâs a tough journey. When you have to swallow losses. I have a period where I have consecutive gains and I think to myself Iâm there finally but consecutive losses come swallow my gains and I doubt if I can do this thing. Itâs a tough game. That was then but now when I look at my losers I think to myself Iâve got a lot to learn ! And I am learning a lot from my losses. So donât be discouraged guys! If youâve stayed this far you will get to the end of this thing.
Hi both of you,
to what rookie said there is nothing to add. I agree with it. Or the one point that I might see the thing a bit other is the CHF. I do not see the strength mentioned by rookie. I am the same as pessimistic on Comms as you are. Tensions and slowing economics, sanctions⌠these are all bad for Comms.
What Mike wrote is very interesting. If we would see a chart where the Major vs. Comms is compared to AUD/USD it would help. What things are you thinking about⌠My God! You are inventing a new indicator but if it worked, would be great.
Have a great day and good trading for now.
[I]I continue now a new series here, 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.[/I]
[B]Crossing Currencies[/B]
I have been told countless times that the trading volume of the currency futures markets are so low compared to FOREX that the COT numbers are meaningless. In spite of this gospel, the IMM (International Monetary Market) currencies have been the venue of some of the timeliest COT Index signals.
There is one oddity among the futures markets, which is the âU.S. Dollar Index,â traded on the New York Board of Trade (NYBOT). Commitments figures are reported for the NYBOT contract, but the small open interest has been worrisome at times (if not problematic).
[I]Summary:[/I] as you see I did not have to write too much today. The only chapter today was only dedicated to currencies, but there was not much writing as the biggest part of the chapter was about charts. The interesting part was though that the author made âcurrency cross COT Indexâ with combining the net positions of the different currencies and plotting it on the charts. Well, I guess you can not be extreme enough on this topic!
Intermarket analysis, an entire new realm of learning.
One quick example is USD/CAD on the 1hr - we see a steady fall in the value of CAD beginning July 25 when price broke up over itâs weekly PP at 1.0745
Same time scale on the CRB index, the weighted index that measures the value of the commodities.
Surprise - the value of the CRB has been falling since âŚJuly 24
Another little thing on the Aussie, I was going to post about it last night but didnât want to influence anyone pre Aus news.
Gold and the Aussie - in the absence of news it is surprising how often a sudden push up in gold will offer about 30 pips on Aus/Usd some hours later, it happens quite often during the London or NY sessions.
It happened again yesterday at NY open - big push up in gold and then 3 hours later up went Aus/Usd by some 40 pips.
I mark these on my MT4 learning chart - previous one was July 17, next day Aud/Usd +60 pips
Also works in reverse, july 29 push down in gold, july 30 -60 pips Aud/Usd
Just something Iâve noticed and am in process of recording.
BTW see how alike the Aussie and the CRB are 1 hr:
Thomson Reuters - Jefferies CRB Streaming Chart | TR/J CRB Index Real Time Chart - Investing.com UK
Hi peterma!
awesome article as usually!
Your intermarket analysis is great. I think CRB Index is too much to follow for me, once I will get lost with the so many indexes.
Gold is something else as it is in my charting program. Regarding to Aussie, can you post your ideas âliveâ? Then we can look at it and decide if we want to trade it or not!
I checked the setups that you wrote. If I might have some correction: yesterday the gold moved exactly the same time as the Aussie. So it was not a signal as they moved parallel. There were to waves of upside moves in both âpairsâ and I think you took the first gold move and paired with the second Aussie move.
July 17: as you follow this relationship longer, I think you just have a better eye for it. I would suggest to Mike and rookie to check the exact time as well to look what they say. I think your idea is clear here, my problem would have been to decide when to enter and exit. But I see this relationship. I could have not put it together though on my own.
July 29: just like the last one, perfect.
Now I have 3 questions:
How does this work the opposite way? Does the Aussie give a signal for gold too?
How strong is the correlation? I ask because today gold moved up but Aussie very bearish which could have resulted in a false signal. Or does it give you some advice how tomorrow the market moves?
That was 4 questions in two topics. I am interested what you have to say!
PS: it is a pitty I did not read your article until the end first. After your CAD example I was looking everywhere for this chart
PS: just tell me when USD/HUF turns. Everything is perfect but this makes me crazy.
The CRB index is just the same as the USD index in that it takes a percentage of the commoditiesâ prices and combines them, so it is easy to see whether commoditiesâ prices are declining - reasonable then to assume that commodity currencies will follow suit - just an outlook or sentiment indicator I suppose.
The Gold thing on the Aussie is more a work in progress, I suspect the rise in Gold and US 10yr in the past few days is a risk off thing, the Aussie just followed the sudden jump - some traders were saying yesterday - âwow, look at the Aussie rise, the smarts must have some inside info on the upcoming numbers, maybe we should follow them and get long tooâ.
Itâs the sharp jump in the gold 1 hr that has the effect, I would say that had gold been flat or down today the Aussie may have continued to fall.
Anyways Iâll post the next âsignalâ - but at present, based on the above I would not short the Aussie going into the Asian
Hey guysâŚ
Majors-----------Comms
Monday: -10 +10
Tuesday: +10 -10
Wednesday: -12 +12
Thursday: +10 -10
And into Friday we go now. Itsâ just been back and forth. Monday Comms come out on top, Tuesday Majors tie up the score, Wednesday back to Comms, by much I must add, then Majors come back on top but not quite able to tie it up, but close. So now itâs just about neck and neck for the last day. And we know Fridayâs can skew the numbers, profit takingâŚsquaring things up for the week, etcâŚBut as we look back, from what we have diagnosed, we can say that the Majors are not really dominating this week. It is interesting that we might have a repeat of recent weeks in which the Majors take over the last 2 days of the week, making them a bit stronger. Weâll see if that happens today.
I wanted to express my thanks to peterma for that valuable info. What good research! I think we might be on to something. Weâre talking about market sentiment in here. And weâre finding much in the way of correlations. Our currencies correlating to other market indices. It does only makes sense, doesnât it? ManâŚI should start keeping track of some of this stuff. We know AUD is the worlds leading producer of gold. CAD is very close to the top with the oil. NZD and dairy. Well, they are all commodity currencies. And Iâm sure we can find other indices that directly affect the Majors. How about the bond markets? Within each.
I got to get to working on this stuff.
It is all about finding an edge in the market.
Mike
Yeah, the bond market is also important, sometimes also used as a risk meter, sometimes when investors leave the S&P because of risk sentiment like they were doing yesterday then the Bonds will feel the benefit, the perception being that funds will run there first.
Classic example at present, the US 10yr going down and the S&P going up, and of course good old Gold in sympathy with the bonds ⌠so at this very minute in time risk is back on⌠I see Eur/Usd agrees with the sentiment.