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.
Hi Iya,
Thanks for your reply, how to determine the 15%?
(Current Open Interest - Previous OI) / (Current + Previous OI) ??
Am I right?
(Current Open Interest - Previous OI) / (Previous OI) … gives you the percentage change in OI from previous week.
Thanks for your reply…
May I know why +15% consider big increase?
Why not +50% only consider big increase? (Maybe sound silly for you all)
Once again, thank you Iya and Mrchilled.
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.
Hi MrChilled,
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 know two. COT index? I’m not sure.
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
Hi Mrchilled,
Do you mind to teach me on how to calculate the indexes?
Thanks for teach me in COT report. Thank you so much.
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.
tonyshieh,
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.
Good trading,
Shay Campbell
TimingCharts.com
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.
Good trading,
Shay Campbell
TimingCharts.com