The value of the commitment of traders data

Thursday, January 20, 2011

Commitment of traders is an excellent report breaking down open interest with useful way, showing locations of long and short, broken player. This is useful data for long-term trading, but in any way that is not necessarily for the trading day. However, using the COT properly can give you valuable insight into future long-range stops and provide other indicators which may come in handy sell great market.

The Commission Trading Futures Community releases weekly COT data reports every Friday after closing. Since the markets are closed, the data is available on the site of the CFTC in text format or spreadsheet, or you can use features of TradeStation to call if you are a user of this software platform.

COT data can represent a solid indicator using to find a directional shift into the commercial market. This usually indicates that it will follow a trend shift. COT marks the data as a commercial vs. non-commercial, so you can use to design long and short positions as percentages open interest. The offsets in the relationship between Long and Short positions may show patterns that only begins to unfold.

However, it is important to realize that most commercial buyers compensation, will brief when the market is growing for a long time the market is in decline, in order to protect themselves from the trend reversal. Commercial traders tend to compensate until they have convinced a major trend that presents a great opportunity to cash, before returning to the compensation behavior. If you watch carefully and find the point where compensation turns on trend following, you might catch the trend when the commercial buyers and cash with them.

COT is not as clear and useful for the Emini especially because Emini day trading dominated by; COT data is inconclusive. However, using large Convention & S P Emini 500 instead, you can effectively use COT to make forecasts for Emini activity. You'll find that similar patterns hold true commitment of traders data for any indicators of high visibility which are traded in large and Miniature formats.

Correlated markets is also a great reason to consider COT. For example, crude oil and the associated interest both OUR stock market and in particular ways; crude oil is a proxy for global development closely, which correlates directly to the stock market behavior. Bonds that are a safer market and investors will move away from stocks to bonds when they feel that their finances are unstable.


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