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Chapter 24, Part II. Trading Sentiment. Page 6

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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    So, let’s resolve this problem. For that purpose we need futures only COT Report (still we will have to deal with some numbers) and two numbers:

    1. Non-Commercial short – all

    2. Non-Commercial long-all

    Having this numbers you can calculate how strong large speculators bearish or bullish in percent. All that you have to do is to calculate next indicators:

    % Non-commercial Long = Non-commercial Long/( Non-commercial Long+ Non-commercial shorts)*100

    % Non-commercial Short = Non-commercial Short/( Non-commercial Long+ Non-commercial shorts)*100

    What it could give us? Simple – we can understand how much in % speculators are short or long, despite of actual number. For instance, knowing that 123K are short contracts does not mean a reversal if they are just 60% of overall position. Quite other conclusion you may get, if, say, the same 42K short of contracts are 85% of overall position. Other words, it’s better to check your thoughts with relative numbers rather than just actual one. Do you get the idea?

    Pipruit: Sure. This is really important.​

    Commander in Pips: Ok, let’s check the real example. This is GBP futures chart. I’ve marked with yellow rectangle two different areas, that have quite different value of Non-commercial positions, but reversal happens in both of them, how this could happen?

    First area in 2005 and COT report for November 22, 2005 shows:

    Non-Commercial short – all = 42076

    Non-Commercial long-all = 9056

    So, % Non-commercial Short = 42076/(42076+9056)*100 = 82.28%

    Second area in 2007 and COT report for July 27, 2007 shows:

    Non-Commercial short – all = 25 086

    Non-Commercial long-all = 123 452

    So, % Non-commercial Long= 123 452/(123 452+25 086)*100 = 83.11%


    Pipruit: Amazing!

    Commander in Pips: See? In 2005 extreme was 3 times lower, but reversal has taken place anyway. The reason is relative value but not the absolute number. Oh, yes – here we’ve compared opposite reversals, but I hope you’ve got the point?

    Pipruit: Absolutely, I’m not confused with that. Thanks, that really helps.​

    Commander in Pips: Ok, that’s all about Sentiment analysis, trading it and COT report. It’s very useful – do not ignore it.

    P.S. This lesson was written by Sive Morten, who has been working for a large European Bank since April of 2000, and is currently a supervisor of the bank's risk assessment department. Sive's knowledge of forex market and banking industry is vast and quite complete. If you have any specific questions about forex, banking industry, or any other financial instruments, please post them on the next page and Sive should answer soon.

    Note: FPA ranks are earned in the battles against scam, not in the classroom.
    #1 Sive Morten, Dec 26, 2013
    Lasted edited by : Oct 1, 2016
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