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Commitment of Traders

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The best thing about COT is that it is not based on the market's price. The COT Buy & Sell signals do not even take the markets price into account. This is strictly an indicator that looks at what the largest industry players are doing, and then simply points out their actions.

The COT reports provide a breakdown of each Tuesday's open interest for markets in which 20 or more traders hold positions equal to or above the reporting levels established by the CFTC. The weekly reports for Futures-Only Commitments of Traders and for Futures-and-Options-Combined Commitments of Traders are released every Friday at 3:30 p.m. Eastern time.



Example of Commitment of Traders

In this graph, the lighter (red) bars that represent the commercials are all selling, or going short, while the trend of the market is going up. The commercials are using the futures market to "hedge" either the cash market, or their current inventory, by going short, or selling, during an uptrend.

The darker (blue) lines, that represent the large speculators, are following the trend of the market more closely. That is because they are speculators, not hedgers. When the market goes up, the large speculators go long, or buy, the market in an attempt to capture profits from buying low and selling high. But the commercials go short in an attempt to price protect their cash crop or inventory.

The small (green) bars represent the small speculators. Generally, the large speculators and the professional traders will use the small speculators as a contrarian indicator. If the small speculators are all buying the market (lines extend above the zero line), then the professionals begin to sell. If the small speculators say sell, then the professionals consider being a buyer. (This is not always true, but unfortunately for the small speculator, it is more often true than not.)