Commitment Of Traders Graph
Get a sense of what the banks are up to with the commitments of traders graph. This graph shows the number of contracts (trades) non-commercial traders – banks, hedge funds, asset manages etc – have open in the market, as well as whether they’re open long or short. Look for changes to understand what the banks might be up to and how strong the current trend is.
Note: The graph updates every Friday at 19.30 GMT in the summer and 20:30 in the winter. The data uses the futures market – a key driver in spot forex – and all currencies are paired with USD – i.e selecting Eur = Eur/Usd.
How To Read This Chart
There are many cool ways to use the COT report – provided you know how to read it.
The graph visually shows changes in open trades from commercial traders – mainly hedgers, who aren’t important – and non-commercial traders, like banks and hedge funds, so we can use it to get key insight into what the banks are up-to.
To read the COT report correctly, you must look at the non-commercials number and see how it changes from its previous number and also the numbers in the recent past. The changes will give you insight into you whether the banks are entering trades or closing trades and on what scale.
For example, if net-longs INCREASE from 232,000 to 241,000, it shows lots of big traders have entered long.
Why would they enter more trades? Because they think price will continue rising, therefore: expect the current trend/swing to continue.
The opposite is also true: if the number of net longs DECREASES, that could be a sign the banks aren’t confident price will continue rising, so a down-move may be on the cards.
Key Point: Never look at the numbers in isolation. Always view them against one another and see at the changes. Compare the most recent number with the previous number, what’s changed? Also, look at the numbers together; is there a trend?
Look at the recent history, and ask yourself:
Are the longs (or shorts) decreasing or increasing over time?
Is this sudden decrease (after a period of increases) a blip or a sign of a reversal?
These are the sorts of questions you need to ask yourself when reading the graph. They’ll give you the insight necessary to understand what the banks are doing and what price could do in the future.