How to follow big players in Forex Trading- Commitment of Traders Report

Forex trading is a zero-sum game, for every winner, there has to be a loser. If you could take a guess who is more likely to be profitable? Retail traders or Big Banks and Hedge Funds?

Well if you guessed that Banks, you are right. Retail traders are in a disadvantage with the amount of information we have in the markets, luckily for us, there is a way to follow what the big players are doing.

In this article, we are going to take a look at the Commitment of Traders Report and how it can help with your trading.

Commitment of Traders Report

What is the Commitment of Traders Report?

Commitments of Trader Report (COT) is published every week by the Commodity Futures Trading Commission (CFTC).

The report shows opened positions by all the subjects that have to report their positions at CFTC. These are positions by big institutional subjects.
Every Tuesday evening, these big players report their positions and the report is published every Friday at 3:30 pm EST (9:30 pm CE(S)T).
The COT Report shows approximately 70 – 90% of open positions at futures markets. The goal of this report is to provide transparency to the futures market and prevent price manipulation.
Although this report is from the futures market, we can use this information in spot currencies and CFD trading since spot forex pairs go hand to hand with currency futures and futures Commodities, Metals and Indicies are same as their CFD counterparts.

What subjects you can find in the Commitment of Traders Report?

Commercials – These are the most important players in the markets as they often hedge their holdings and tend to have the most insight about the movement of future prices. In a healthy trend, you should watch commercial positionings going with the trend.
Large Speculators – Trading firms and hedge funds who speculate on the markets to gain profits. These tend to be right most of the time, but there are some exceptions to that.
Small Speculators – Private investors and retail traders, they don’t have to report their positions to CFTC.

Where is the Commitment of Traders Report published?

The original version of the COT Report can be found at the CFTC website.

 

There are also more interactive versions to display data such as barchart.com or freecotdata.com

 

 

As you can notice on the above chart of Canadian futures. Commercial participants (red line) were heavy long in both early 2016 and mid-2017, both of this informations signalled big trend moves in the market for the following months ahead.

As this showed us the strength of the Canadian dollar, we could use this as a trend move of USD/CAD short.

 

In Conclusion

The Commitment of Traders is a great tool to help you understand the market sentiment, but this report itself should serve you only as a benefiting advantage to your analysis and there should be a discretion exercised while using it.

When you are watching a report, it is generally perceived not to look at low timeframes, but to rather stick with a daily/weekly timeframes and look for big extremes where you can find a big difference between commercial and small speculators positioning.