CoT reports (Commitment of Traders) are valuable tools for analyzing market sentiment, especially for traders working with futures, options, and currencies. In this article, we will look at what CoT is, when it is published, and how to analyze it in practice.
What Are CoT Reports?
CoT reports are published by the US Commodity Futures Trading Commission (CFTC) and reflect the positions of different groups of market participants in the futures and options markets. These reports provide insight into who is buying, who is selling, and in what volume. Traders use the CoT to analyze sentiment and identify possible trend reversals or continuation.
When Are CoT Reports Published?
The CoT report is published every Friday at 3:30 PM ET, but the data shows participants’ positions as of the previous Tuesday. This means that there is a slight delay in the information. Therefore, this report helps to assess more medium-term trends rather than intraday or intra-week trends.
How Do I Read and Analyze CoT Reports?
The main groups of CoT participants are:
- Commercials (hedgers): Large companies that use futures to hedge their business risks (e.g. grain producers or oil companies). Their actions often indicate long-term price expectations.
- Non-commercials (speculators): Hedge funds, institutional investors, and large traders who seek to capitalize on market movements. Their positions most often reflect the trend in the market.
- Non-reportable (small traders): Retail traders whose positions are small and less meaningful to analyze.
The report is divided into tables with the positions of the participants. The main indicators to pay attention to are:
- Long (long positions): Buyers.
- Short (short positions): Sellers.
- Net Position: The difference between Long and Short.
- Open Interest: The total number of open contracts.
Below is the COT report on the EURO FX futures (equivalent to the EUR/USD currency pair on Forex):
Example of Analyzing a CoT Report
Let’s say you are analyzing the EURO FX futures (equivalent to the EUR/USD currency pair on Forex). You see the following picture in the CoT report:
Non-commercials positions:
- Changes in Long positions: -5 698 contracts;
- Changes in Short positions: +29 422 contracts;
- Net Position: -27 567 contracts.
Conclusion: Speculators are bearish as they have a large preponderance of short positions.
Commercials positions:
- Changes in Long positions: 32 197 contracts;
- Changes in Short positions: -7 124 contracts;
- Net Position: +25 073 contracts.
Conclusion: Hedgers are taking more long positions. This indicates that they expect the euro price to rise.
Non-reportable positions:
- Changes in Long positions: -1 967 contracts;
- Changes in Short positions: +2 234 contracts;
- Net Position: +267 contracts.
Conclusion: Small traders expect a rise in the euro’s value, but the difference in contracts is not large, which generally does not have a significant impact.
What does this mean?
If speculators (Non-commercials) continue to build up short positions, the trend may be bearish (price decline). However, a significant preponderance of long positions by Commercials may indicate a growing probability of a trend reversal shortly.
How to use CoT in trading?
- Look for divergences: If speculators (Non-commercials) are going long and hedgers (Commercials) are going short, it may be a signal that the market is overheated and a reversal is possible. And vice versa.
- Assess market sentiment: A significant change in the net position of one group may indicate a trend change. For example, a sharp increase in speculators’ (Non-commercials) continuation of a bullish trend often accompanies net long positions.
- Use in combination with technical analysis: The CoT report alone does not provide accurate entry points. Combine it with support/resistance levels, indicators, and other analysis methods.
How do I find the data I need?
Official CoT reports are published on the US Commodity Futures Trading Commission (CFTC) website. You can find them on the following page:
👉 https://www.cftc.gov/MarketReports/CommitmentsofTraders/index.htm
On the home page of the Commitments of Traders section, you will find links to different types of reports.
How do I find the data I need?
1. Select the type of report:
- “Current Legacy Reports”: The classic CoT version with group data (Commercials, Non-commercials, and Non-reportable).
- “Disaggregated Reports”: A more detailed version with additional categories.
- “Financial Reports”: Specific to financial markets (currencies, bonds, etc.).
- “Supplemental Reports”: Reports for some specific markets.
2. Select a market:
- Find the asset you are interested in (gold, oil, currencies, etc.) in the list.
3. Download data:
- Reports are available in PDF or TXT format for manual analysis and CSV format for automatic processing.
Finish words
CoT reports are powerful tools for understanding market sentiment. Proper use helps traders evaluate long-term trends and better understand the actions of major participants. However, remember that CoT provides only part of the picture, and it is important to combine it with other analysis methods for trading success.
Start small: Pick one market, such as oil or gold, and watch your positions change from week to week. This will help you get used to interpreting the data and putting it into practice. It is recommended that beginners start with Legacy Reports — they are easier to understand.
