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Chapter 24, Part II. Trading Sentiment.

Discussion in 'Complete Trading Education- Forex Military School' started by Administrator, Feb 2, 2012.

  1. Administrator

    Administrator Just Administrator :-)

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    Part II. Trading Sentiment. [​IMG]
    Pipruit: Sir, I’m a bit frustrated, since you’ve talked much about importance of that COT report and so on. How can we translate all this crazy table of numbers formatted in the early 80s into information that we could use in trading…​


    Commander in Pips: After long thoughts I’ve decided to make your life a bit easier, since I’m aware of your grumbling about translating text tables into something that could be applied to trading. So, here is a great supporter for you – Timing Charts. It could be very helpful, since there is not much software, especially among Forex brokers that contains COT report charts. Also here you can look at chart of any futures you want – not necessary currency but stocks, bonds, commodities…

    [​IMG]
    Since COT report comes on Fridays, i.e. weekly, it will be most useful for day traders and higher. So here is how it looks like:


    [​IMG]

    It looks nice, doesn’t it? So let’s discuss it. This is a weekly chart of the EUR/USD, I choose line chart, since it’s quite enough for our discussion, but you may draw any that you want – bars, candles… So, two lines below the chart are positions of Commercials (blue) and Large Traders (green). Also you may draw a retail traders line, but I intentionally skip it, since it carries no sense currently and to keep chart as clear as possible.

    Here is how we will analyze it. First, let’s start with green line that is the positions of large traders. We’ve said that large traders, since they are really large usually apply “follow the trend” strategy and gradually increase position with the trend. You can see the confirmation of that on the chart. In the middle of 2010 large traders’ positions were extremely short and gradually start to reverse to the long side. If you’ve bought there, you were able to get profit 2.5K pips, not bad ah? The same is true for the middle of 2011. Large traders’ positions hit extreme long value around 1.47 and then gradually start to turn toward the bear side. Now you see that this process is still under way.

    So, what kind of conclusion we could make?

    Large traders’ position could be used as a trend indicator
     
    #1 Administrator, Feb 2, 2012
    Lasted edited by : Oct 1, 2016

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