On June 8 this year Spain had it’s rating cut by 3 notches to Baa3 - one notch away from junk status, Cyprus had it’s rate cut two notches - now well into junk territory.
The accompanying report said that further downgrades were possible. Downgrades of France and Germany were also likely should the Eurozone break up.
In July Suisse Bank report urged’ Firms to prepare for Eurozone break up’.
Eurozone periphial countries, including my own, were openly acknowledging that they were making preparations.
If you open a chart on Fibre daily - let it show you 12 months and have it stop on July 24 2012 - do’nt show anything else on the right - you now have the picture both from the fundamentals and the technicals - the Euro has to fall further.
This video - made on July 22 - at 16.00 mins listen closely - this is cot interepation and how to read it.
Red line= 12 month extreme of COMMERCIAL net positions
Orange line = open interest
Line chart = net COMMERICAL positions
I’ll pass on your last sentence but I will give you some words of wisdom, take or leave it, makes no difference to me: DO NOT believe everything you read or watch on forex. If you have watched some videos telling you non commercials are the key, pull the data yourself and prove it. ALWAYS ALWAYS test and practice with the data, do not believe everything you read. i would say 80% of content that is around the net is complete rubbish and misleading, try to filter and use the trusted genuine stuff. Good luck.
I though I’ll put in my thoughts here regarding the “who are the smart money?” question.
I think it is important to put down some important remarks first. Since the cot report is not a derivative of price, we should be careful in interpreting its information as if it was a usual TA, such as RSI for example. If we understand this then we also have to see that although there are general tools in cot analysis that can be used on each market, since it is showing the positions of traders trading that specific market, we need to see that every market has its own characteristic --> a change of 20% (based on a 1 year range) in positions held by traders on Oats market has a different meaning then a 20% change in CAD. OR another example --> interpreting signals of small speculators: Small Speculators are correlating with Large Speculators on most of the markets, but in Live Stock markets (for example Live Cattle) they tend to correlate with Commercials.
To answer the question above, in general I think it is best to follow Large Speculators (non-commercials) in a trend. Of course we have to keep our eyes open at COT extremes and see that Commercials are the ones who are on the right side of the market at trend reversals (tops / bottoms). Of course as I’ve said above, we need to analyze markets separately and do a historical analysis to understand the specific signal we wish to understand.
I have a thread here on babypips ([B]Follow the Smart Money / COT Analysis[/B]) that deals with cot analysis, where I try to show you the tools I use to analyze cot data. You might want to check it out if you would like to know more about this topic.
Basically you asked Dstan on his thread for some trade examples and after he said that his thread wasn’t about showing trading examples but to educate trader on the subject of COT you quit the tread yet you are doing the same here! Don’t you think?
I didnt quit this thread, I’m still here. My point is if I did start a thread and start pulling 40 lines plus of commentary every week on the COT like Dstan does, then it would have more credibility to show examples of live trades. How can someone educate people without firstly showing that they can apply what they preach. Don’t you agree with me?
I didn’t mean you quit this thread but the one started by dstan! Yes I do agree that is why I asked for some trade examples from you on this thread. I have a small account in a Bank in Europe ( in the country that I was born but I live in the US) luckily it allows me to choose my currency and that is the only time I use cot, I don’t leverage with it because it’s positional and in the past I changed this account from euros to dollars and vice versa, it’s not a big thing but it worked out, of course the account is not big enough to make any true impact in my financial scene but ended up making a few bucks. But you look like this is your main way of investing and that is why I asked!
I read a lot of article. All the article asking us to follow Non- comm even Kathy Lien also asking us to follow non-comm
But in Larry Williams’s book do ask us to follow Comm (Smart Money) thats make me confusing.
Mrchilled, you are pretty good in excel.haha
Kathy Lien is one of my favorite writers on the forex market, it’s easy for you to find out just put a daily chart and put up the cot report and ask yourself who’s in harmony with the trend.
Anyone can explain to me why Open Interest is so important?
I’m new in COT report but i read a lot article yet still not understand the importance for Open Interest.
I only understand the Extreme level from the COT report.
Commercial traders are the biggest short sellers. If there’s a big increase in OI (15% +) means a lot of short selling. If there’s a large decrease (15% +) means they are lessening shorts and to look for longs.
15% is a significant change to alert you something may be brewing. Sure, the higher the number, the more you should pay attention. It doesn’t mean every 15% or more change leads to something though.
In 18th December 2012, the CHF (commercial) net position is extreme and the OI is about 12 percent.
So based on this, the CHF should be strengthen. But in the market, is different with what I thought.
Can you please explain to me?
In your previous post, you’ve mentioned that if 4 out of 6 pass, you will enter.
May I know which 6 you are mentioning?
I) COT EXTREME
II) OI
I only trade GBPUSD and no other currency pair. I tried a few day trades on EURUSD but they didn’t work out, so I can’t comment on USDCHF. Just bear in mind that all COT currencies are against the USD so GBPUSD, EURUSD, CHFUSD, but in spot forex, it’s USDCHF, so you have to inverse the results to compare. That may change things …
I have 6 paramaters to take a trade, one a COT derived paramter based on extremes, open interest and indexes. The other 5 are forex parameters like support & resistance. I’m definitely no expert on this, so don’t want to mislead anyone. The only piece of advice I will give is master one or two things, be it the COT or something else and mould a strategy around that which gives you a high probability of happening. COT on it’s own is useless (well, that’s what I think - obviously somone could prove me wrong eg Larry Williams). Good luck
Use the index calculation from Larry William’s book and then tweak it to your liking. If you can get really comfortable with the data, you’ll know what to index or derive but Larry William’s book gives some good ideas.
The most common use of the COT reports is to take the total long position minus the total short position of each of the 3 groups. This is known as Net Positions and looks like this…
The Net Positions can be then be used to create a C.O.T. Index. This index scales the results of the Net Positions to a range from 0 to 100 based on a specified lookback. The lookback period is the number of weeks you want to use to create the scale. If you want to see the last 6 months then use 26 weeks, for a year 52 weeks etc. This is the 26 week C.O.T. Index of the Net Positions above…
These are both useful calculations to use the COT report but you may prefer to create your own calculations. TimingCharts.com also makes available a Custom selection which allows you to Add - Subtract - Multiply - Divide all of the fields in the COT report. I find this to be more revealing than just looking at the Net Positions.
Timing Charts now has the complete Commodity Index Traders (C.I.T.) database available. The CFTC started issuing the C.I.T. report in January of 2007 with one year of history, so the data begins in January 2006.
This new report removed the long only Index Traders or Swap dealers from the Commercial category. These swap dealers largely bought futures for ETF’s and ETN’s, yet they were being classified as Commercials for lack of a better place to put them.
The C.I.T. report created a fourth category called Commodity Index Traders to go along with Commercials, Large Traders and Small Speculators.
On the above chart you can see the C.I.T. is consistently very long. In order to see more detail about the movements of the C.I.T. position you can deselect the other categories by clicking the large colored buttons in the C.O.T. control panel.
When the CFTC starting issuing the report they announced it as a pilot program for just 2 years with a limited number of markets. The report is now 6 years old with 7 years of history. Just last month Soybean Meal was added to the short list which now consists of the following 13 markets:
WHEAT - CHICAGO BOARD OF TRADE
WHEAT - KANSAS CITY BOARD OF TRADE
CORN - CHICAGO BOARD OF TRADE
SOYBEANS - CHICAGO BOARD OF TRADE
SOYBEAN OIL - CHICAGO BOARD OF TRADE
SOYBEAN MEAL - CHICAGO BOARD OF TRADE
COTTON NO. 2 - ICE FUTURES U.S.
LEAN HOGS - CHICAGO MERCANTILE EXCHANG
LIVE CATTLE - CHICAGO MERCANTILE EXCHANGE
FEEDER CATTLE - CHICAGO MERCANTILE EXCHANGE
COCOA - ICE FUTURES U.S.
SUGAR NO. 11 - ICE FUTURES U.S.
COFFEE C - ICE FUTURES U.S.
