Both cases represent negative divergence and reflect that both trader categories are supportive of the latest upside price action. Shortly after, the EUR/USD price entered a bear market, which lasted almost 18 months (in red). The argument here is that delayed data is also considered to be discounted by current market prices and therefore not useful. As the name suggests, this category represents large institutions and traders looking to speculate on different commodities and market instruments with the goal of making a profit on their speculative positions.

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Market-bulls.com does not accept responsibility for any loss or damage arising from reliance on the site’s content. Users should seek independent advice and information before making financial decisions. Asset Manager/ Institutional are different institutional investors. They are mostly holding the biggest positions of the buy side. The Asset Manager/ Intermediary Classification includes pension & mutual funds, endowments, insurance businesses and investment managers with mainly institutional customers.

The Commitment of Traders (COT) report helps forex traders understand how large players like banks, hedge funds, and institutional investors are positioned in the currency markets. It shows whether these big traders are buying or selling specific currencies, giving insights into potential price direction. By following the COT report, forex traders can make smarter decisions and align their strategies with market trends. I’m Chaitali Sethi — a seasoned financial writer and strategist specializing in Forex trading, market behavior, and trader psychology. With a deep understanding of global markets and economic trends, I simplify complex financial concepts into clear, actionable insights that empower traders at every level. Whether it’s dissecting winning strategies, breaking down market sentiment, or helping traders build the right mindset, my content bridges the gap between information and implementation.

• We can also see commercials positioning for higher prices, which is the opposite of what to expect.
• Thankfully, many financial websites, charting software packages (like TradingView or platforms like MetaTrader via add-ons), and specialized analytical services do the heavy lifting.
• The COT report gives insights on the positions of different market participants in the US.
• Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it.
• This chart shows the weekly Commitment of Traders report published by the CFTC.

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On this chart, you can see the net “non-commercial” (speculative) positions taken on by forex traders in the U.S. futures markets. Data in the COT report influences – and is influenced by – the spot foreign exchange market. Clearing members, futures commission merchants, and foreign brokers (collectively called reporting firms) file daily reports with the Commission. Those reports show the futures and option positions of traders that hold positions above specific reporting levels set by CFTC regulations.

However, if global risk sentiment is deteriorating or key economic data signals a slowdown, that bullish positioning could quickly unwind. Without context, traders risk placing trades that align with outdated sentiment rather than current market realities. The Commitment of Traders Report has been a valuable predictor in many real-world market scenarios. In 2022, before the U.S. dollar’s strong rally, non-commercial traders steadily increased their long positions for several weeks. This early buildup in trader positioning data foreshadowed the dollar’s surge, allowing informed traders to position early.

The COT report is published to help the market participants in analyzing the market sentiment that prevailed over the past week. First, let’s define what COT is and how important this report is to traders. In the previous lesson, you’ve learned the importance of market sentiments in the forex market.

Commitment of Traders Report Explained Simply

However, this is a significant generalization, and attributing uniform behavior or lack of sophistication to this diverse group can commitment of traders forex be misleading. The real value in the commitment of traders report explained comes from knowing who these groups are and what typically motivates them. For many, the Legacy report offers a sufficient commitment of traders report explained perspective.

Report Frequency

Long-term traders can also use the COT report to identify accumulation or distribution phases before they manifest fully in price action. Observing gradual changes in positioning helps traders adjust exposure before the broader market reacts, allowing entry or exit at more favourable levels. This is why experienced traders rarely rely on price action alone. When positioning data and technical setups point in the same direction, confidence in trade execution increases. By integrating speculative position trends into market timing decisions, traders gain an edge in anticipating moves that catch less-prepared participants off guard. For instance, if the Canadian dollar breaks out above a long-term resistance level and the COT data shows rising long positions from large speculators, the probability of a sustained rally increases.

• On this chart, you can see the net “non-commercial” (speculative) positions taken on by forex traders in the U.S. futures markets.
• That could lead to misleading information, because one trader holds different positions of a specific future for different reasons, but is specified in one classification for the whole report.
• The CFTC receives the data from the reporting firms on Wednesday morning and then corrects and verifies the data for release by Friday afternoon.
• Trading in digital assets, including cryptocurrencies, is especially risky and is only for individuals with a high risk tolerance and the financial ability to sustain losses.
• This is the origin of futures markets, and financial markets generally, and is a long-established practice.

The CIT Report has data available back to January 3, 2006, and both the Disaggregated Reports and Trader in Financial Futures reports have data back to June 13, 2006. The spread number needs to be added to be both long and short sides, respectively. If you are doing these calculations on the Combined file, the sum of the long and or short positions may be +1 or -1 Open Interest, due to option delta calculations.

These are typically hedge funds and various types of money managers, including registered commodity trading advisors (CTAs); registered commodity pool operators (CPOs) or unregistered funds identified by CFTC. The strategies may involve taking outright positions or arbitrage within and across markets. The traders may be engaged in managing and conducting proprietary futures trading and trading on behalf of speculative clients. The concentration ratios are shown with trader positions computed on a gross long and gross short basis and on a net long or net short basis.

Once you have the data and understand the players, the next step in mastering the commitment of traders report explained is interpretation. This involves looking beyond the raw numbers to identify meaningful patterns, trends, and potential signals over time. It’s calculated by taking the total open interest and subtracting the positions held by all the reportable categories (Commercials, Non-Commercials, Swap Dealers, etc., depending on the report format). It represents the combined positions of all traders whose individual holdings are too small to meet the CFTC’s reporting thresholds. This group is often assumed to be composed primarily of smaller, individual retail traders.

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In the COT Report published weekly, I want to understand what the spreading position means. For example, the Managed Money length for ethane on the CME is 5,762 lots long and 3,355 lots short. However, the number of traders reported on the long side is 0 while the short side has 9. Is there some type of netting that is occurring in the number of traders category? Due to legal restraints (CEA Section 8 data and confidential business practices), the CFTC does not publish information on how individual traders are classified in the COT reports. This information has been prepared by IG, a trading name of IG Markets Limited.