CoT - Commitment of Traders Report Chart
Market direction is a result of the overall opinion of all its participants. This total assessment, some average feeling of the market that weighed on the value of positions is called a market sentiment, and the market will move in the direction where sentiment points it to go.
The most widely used market sentiment gauge is the CoT (Commitments of Traders) report published by the CFTC each Friday at 19:30 GMT. Each CoT report includes a breakdown of each Tuesday's open interest for markets in which 20 or more traders hold positions above the reporting levels.
Unfortunately, CFTC reports are extremely hard to read and interpret, therefore, this tool can be a great way to simplify the reported numbers.
Why you should use the Commitment of Traders Report Chart?
The commitment of Traders Report is basically a snapshot of what traders and investors are doing as seen by the lines of Long, Short and Net positions of Noncommercial traders
It can help you better understand the current situation in a particular market and, therefore, understand if you want to be taking either a long, short, or no position.
Check out our article on Forex Sentiment Analysis for further reading
Non-commercial vs commercial traders?
Non-commercial means that these positions have been taken by private money, therefore, what is left are large institutional investors, hedge funds, and other entities that are trading in order to achieve profit.
This allows us to better understand what other traders are doing, therefore, predicting what the current market situation/sentiment is.
Commercial Traders represent companies and institutions that trade to offset risk and, therefore, are not looking to profit from the change in price itself. They do not care about the current market situation and are excluded from the report as they are not looking to trade the market with any kind of strategy.
You can check out our article on 6 essential skills needed to become a profitable Forex trader for further understanding what it means to be a trader.
How to use it?
The chart is made up of weekly report data for a specific currency that can be changed in the bottom left corner of the chart.
From these results, a line is drawn for 3 metrics of
- Long Noncommercial Positions
- Short Noncommercial Positions
- Net Noncommercial positions
With the values represented on the left-side vertical axis with the base value of 0 for positions seen as the horizontal light grey line.
Weekly Close Price line is added with values seen of the right-side vertical axis in order to better grasp what the price was doing during each of the CoT (Commitments of Traders) reports.
Additionally, further reading is always available in our blog/trading resources section or looked-up using the search feature.
Keep in mind that this information should also be used in addition to other tools and types of analysis such as:
Read further about How to Combine Different Types of Forex Analysis
Now you should be ready to start using the Commitment of Traders Report Chart and combine it with Forex Day Trading Strategies.