Understanding the Basics of Fundamental Analysis for Forex Trading

This script marks the last Friday of the month in a daily chart because this is the day when BTC and ETH options expire according to Deribit. I only found a script that highlights the 3rd Friday of the month, which is not what I wanted. This script tries to figure out the correct number of days per month but is not aware of holidays which might displace the expiry date.

• Of these, 14,320 were longs held by dealers and 10,875 shorts sold by institutional traders.
• As a result, a classic bullish set-up for a given market would be when large traders are net long and small traders are net short.
• The COT Public Reporting Environment (PRE) provides an application programming interface (API) to allow users to customize their experience with the COT market report data.
• A trader’s long and short futures-equivalent positions are added to the trader’s long and short futures positions to give “combined-long” and “combined-short” positions.
• Non-reportable traders don’t have the heavy bank accounts of commercial and non-commercial traders.
• A reversal may occur when the spread between commercial and non-commercial traders is wide.

Understanding market sentiment can help traders anticipate potential shifts in currency exchange rates. For example, if the majority of traders are bullish on a particular currency, it may indicate an upward trend in its value. The COT report is a weekly sentiment report that can provide forex traders with important information on the positioning of currency pairs. Issued by the Commodities Futures Trading Commission (CFTC) the COT report can be cross-referenced with a trader’s underlying forex strategy. Market sentiment refers to the overall attitude of traders and investors towards a particular currency.

Using the COT Report in Forex Trading

The image below depicts an extract from the COT report with the three main groups as outlined above. Hello there,
With this script, you can see CFTC COT Non Commercial and Commercial Positions together. This way, you can analyze net values ​​greater than 0 and smaller, as well as very dense and very shallow positions of producers and speculators. Green – Non Commercials – Speculators
Red – Commercials – Producers

This script is multi time-frame and…

The purple area is the Daily December Futures contract subtracted by the current price. The blue area is the Daily September futures contract subtracted by the current price. The green area is the Daily June futures contract subtracted by the current price.

How a Commitments of Traders (COT) Report Works, Types, Example

The Net Non-Commercial Positions shown in the chart above are from contracts held by large speculators, mainly hedge funds and banks trading currency futures for speculation purposes. These contracts, sold in lot sizes that vary by currency, net out to have either a surplus of buy requests (positive values in the chart) or sell requests (negative values). This weekly report provides analysis of the CFTC report, showing the positioning of forex futures trades with a synopsis of the key flips in positioning. From the report located above, the number of funds off-loading the JPY shorts increased dramatically from the week prior.

Department of Agriculture’s Grain Futures Administration issued an annual report outlining hedging and speculation activities in the futures market. In the 1990s, the report moved to a bi-weekly publication before going weekly in 2000. Open interest is the total of all futures and/or option contracts entered into and not yet offset by a transaction.

Forex Trading Reviews: The Pros and Cons of Automated Trading Systems

For one of the reports, Traders in Financial Futures, traders are classified in the same category for all commodities. Open interest held or controlled by a trader is referred to as that trader’s position. For the COT Futures-and-Options-Combined report, option open interest and traders’ option positions are computed on a futures-equivalent basis using delta factors supplied by the exchanges. commitment of traders forex Long-call and short-put open interest are converted to long futures-equivalent open interest. Likewise, short-call and long-put open interest are converted to short futures-equivalent open interest. For example, a trader holding a long put position of 500 contracts with a delta factor of 0.50 is considered to be holding a short futures-equivalent position of 250 contracts.

The first place to start with is a clean understanding of ‘net positioning’ which is shown clearly on the report itself, as well as the week over week differential of major market bias (circled above). However, the original COT reports are text based and the CFTC does not provide any data analytics tools. Notice that the Red bars are all pointing down, which indicates that the Commercials are all selling, or going short. Notice that the Blue bars are all facing up, which means the Large Speculators are buying, going long in the market. Basically, the Red guys, the big Commercials are selling their contracts to the Blue guys, the Big Speculators. Look at the little Green guys, they are the Small Speculators, guys like you and me, who are also going short, or selling, that’s why their bars are all facing down too.

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The biggest weakness with the COT is that, for a document meant to promote transparency, the rules governing it are not transparent. The CFTC receives the data from the reporting firms on Wednesday morning and then corrects and verifies the data for release by Friday afternoon. Central banks play a crucial role in shaping monetary policies and maintaining economic stability. Traders closely monitor central bank decisions on interest rates, quantitative easing, or other policy changes.

The COT report can serve as a powerful forex volume indicator when you use it rightly. Since CFTC releases the weekly report every Friday for all trades recorded before Tuesday, you can only use it for long-term trades. Upon the first reading of the COT report, it may seem confusing how future positions in USD, JPY, GBP or EUR could be helpful for trading EUR/USD, USD/JPY, or EUR/GBP. There is a lot to learn about the COT report but what’s often helpful is to find where there is a strong divergence between large speculators and large commercials. To help you analyze important trends and movements using the Commitment of Traders reports, Tradingster.com provides up-to-date COT reports (including COT reports’ historical data) and free COT charts. The reports are read as tables, which each row and column labeled appropriately (see the example above).

Conversely, a decision to lower interest rates can stimulate economic growth but may result in a depreciation of the currency. GDP represents the total value of goods and services produced within a country. A higher GDP indicates a strong economy, which can lead to an increase in the value of the currency.

Non-reportable traders don’t have the heavy bank accounts of commercial and non-commercial traders. They are speculators with smaller accounts who are also looking to make money from the futures market. The Commitments of Traders (COT) reports are provided by the Commodity Futures Trading Commission (CFTC).

The short format shows reportable open interest and week-to-week open interest changes separately by reportable and non-reportable positions. Forex trading is the largest and most liquid financial market in the world, with trillions of dollars being exchanged daily. Traders participate in this market to profit from the fluctuations in currency exchange rates. To make informed trading decisions, traders use various analysis methods, including https://g-markets.net/ technical analysis and fundamental analysis. The COT report’s results can be used as a tool to give traders a better understanding of the psychology of the marketplace, the net position of the commercials in the market and the net position of the large traders. Large traders (funds) are typically trend-followers and will add or liquidate their positions depending on the technical action of the market since the release date of the report.

Who are the non-commercial traders?

The remaining three categories (“asset manager/institutional;” “leveraged funds;” and “other reportables”) represent the buy-side participants. These are essentially clients of the sell-side participants who use the markets to invest, hedge, manage risk, speculate or change the term structure or duration of their assets. The category called “dealer/intermediary,” for instance, represents sell-side participants. Clearing members, futures commission merchants, and foreign brokers (collectively called reporting firms) file daily reports with the Commission.