A Review Of Commitment Of Traders Report

By Ronald Ellis


Commodity traders have an open access to a distinctive market report each week, which details the position of major corporate speculators and small investors in various future markets. This information is popularly known as Commitment of traders report. The report is an important analytical tool for traders since it offers up-to-date information concerning the trends in every commodity markets. It is also available on future contracts like interest rates, stock indexes, and currencies.

The information available in this weekly report enables private speculators to invest wisely. It helps them to make decisions on whether or not to settle for short or long positions. Positions of small-scale speculators are rarely followed; the law does not require them to present a report of their trading activity. Commercial investors have an amazing mastery of market trends hence much attention is paid to their report. The positions of these investors are highly profitable. Successful investors know how to interpret the COT information and make smart investment decisions.

The COT report details the net long as well as short positions for each existing futures contract for three diverse types of traders. If commodity speculators are tremendously long or increasing their long positions, then a strong bias is expected on that market. A bearish bias on a market is expected when they are either short or amassing their short positions.

Mastery of the COT report becomes easy when you know the types of major players in the market and their corresponding positions. The data usually is presented in three special categories: non-commercial traders, commercial speculators, and non-reporting investors. Commercial speculators consist of institutions and accomplished investors who utilize the futures market to level off their risks specifically in the cash or spot market. A producer may decide to short his or her products to avoid instances of losses in case the price goes down in future.

Non-commercial merchants consist of large corporate investors, hedge funds, and other notable entities, which are trading for investment and growth. They are indirectly involved in the production, supply, and management of the basic commodities and assets. A special attention is paid to this group due to their mastery of futures markets and ability to make calculated guesses. Keeping track on the activities of non-commercial merchants gives investors some insight about the trend for a certain asset class.

Non-reporting category is made up of small investors who never report their positions. They have a habit of betting against trends instead of with it. Thus, only a few people pay attention to this type of investors. The category comprises of private investors who trade in different types of products in the futures market.

There are different categories of COT reports ranging from equity investors (stock prospects), currency traders, and commodity traders comprised of oil and gold. Relying on raw data from CFTC might be confusing. Therefore, it is imperative to view the changes within the information for a significant period instead of a single snapshot.

Changes within open interests can be used to gain an insight on how the price of a given commodity is behaving. Understanding the changes can be helpful in devising long-term growth and investment plans. A decline or a balance of long-term market downtrend or uptrend is a confirmation of an ending trend.




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