I would like to ask a question about the COT report. I believe this data shows the net long and net short positions for a certain currency which is submitted on Tuesday and released on a Friday.
Now my question is, why is this report important? if this data shows the positions that have been placed into the market then surely, the charts will reflect this. What good is the date when these positions have entered the market.
If this info is supposed to be used as a market sentiment then what good is it as its a lagging data and sentiment can be seen on charts right?
COT data doesn’t really “lag”. It takes a long time for the big speculators to accumulate and offload positions, and trends can last for months.
Sentiment can be hard to read directly off the charts. Suppose you have a ranging market. It might seem like the big speculators are neutral. But then you check the COT report and can see that they’re accumulating long positions. The market is ranging because these boys are quietly buying from anyone who’s selling. After some time, sellers will dry up and the market will break out upwards. The COT report will forewarn you about what’s going to happen. It’s not 100% accurate, but it can be accurate enough to gain a profitable edge, and that’s all you need.