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Chapter 24, Part II. Trading Sentiment. Page 5

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 26, 2013.

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

    Aug 28, 2009
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    Since short positions are negative numbers, this indicator will surplus absolute values of them either with plus (Long Large + short Commercial) or with minus (Short Large + Long Commercial).
    Then acts as with DOSC.

    The second way to deal with it is to normalize it within some rage. In this case you will get something that will look like an oscillator. Let’s call it as FPA COT Oscillator:

    Find the minimum (most negative) and maximum (most positive) COT Indicator values for predefined time period, say 3-5 years:

    COT OSC = (COT Indicator value – MIN COT Indicator Value)/(MAX-MIN COT Indicator value)*100.

    In will look like 0-100 ranged line. When indicator will reach 95-100, it will mean that we have to be aware of downward reversal and await Sell reversal patterns on daily – weekly charts. If oscillator will reach 0-5 value, we have to be ready for upward reversal.

    The major thing here is –


    Here is some more information about COT data. Also, you will find codes for the MT4 Indicator here: http://articles.mql4.com/download/9901

    Small Add-on with huge sense

    Commander in Pips: Ok, and finally a small add-on – the algorithm of a small check – will reversal appear to be truth or not. As you remember we’ve said that not every extreme in COT data leads to reversal. So, let’s discuss why it happens like this.

    But first, answer me on one question – when reversal is more probably going to happen, when total non-commercial short 42 076 contracts or when 123 452 contracts?

    Pipruit: Commander, that’s obvious – of course in the second case, since there are more amount of short traders and fewer buyers left.​

    Commander in Pips: And how do you estimate that there are fewer buyers. I’ve told nothing about long position…

    Pipruit: Well, I’ve just thought…heh, I don’t know why I’ve decided that…​

    Commander in Pips: That’s right son. Here is your question. You do not know the total position – as long as short. That’s why you can’t say what is better for reversal 46K or 123K, since you do not have foundation point – relatively to what?
    #1 Sive Morten, Dec 26, 2013
    Lasted edited by : Oct 1, 2016
    matusmajernik likes this.
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