Lesson #72 The Forex COT Report

If you measure the market in a sentimental manner, then you are doing a rational job. It is the job of a good trader to determine the market conditions. The market condition could be good, bad, oversold, over bought etc. if you asses all these conditions properly, then it would prove very beneficial to you.

Guidelines for Forex Trading

A sentimental forex review can guide you about usable tools and reactions in different conditions. There are several techniques to measure the prevailing conditions of a market. One is the fundamental analysis and other is the technical analysis. Most of these technical indicators are taught in the Pipsology School. Therefore, you have to find out the technical tools for a better sentimental forex analysis.

Commitment Made By Traders Report

Importance of Commitment

The commission of Commodity Futures Trading regularly publishes the COT report. COT stands for the commitment of traders. This report is published on Fridays. The accurate positions i.e. long and short of the traders are measured in the COT. Measuring the market sentiments from the viewpoint of victorious traders is a good resource. This is because, they have acquired a significant position and they report directly to the Government. The COT report definitely makes a deep impact on your position in the market.

Ways to Use the COT Report

As the COT report is printed on a weekly basis, it is very apposite for any long term dealer to utilize it as a sentimental market gauge. There are various techniques to accomplish this. You can use the changes in the interest and variations in the short and long contracts to indicate the volume. You can also utilize the COT report in order to find out the excessive and specific short and long positions in the market. In conditions like the market reversal the market can even divert itself to anther direction.

Understand the Details of COT Report

You can also understand the details of the COT report with the help of a US dollar index. In the topmost area of the chart we can quote the action of the price of the United States dollar index. And each of these bars represents the weekly data. In the bottommost part of the chart, we have the information on the net short or net long positions. These positions are bifurcated into three sub categories that are blue green and red. Blue indicates commercial, green indicates big non commercials and red indicates small non commercials. The big non commercials should be considered the most because these commercial postulates are for prevarication. The small retail dealers are not considered as an important factor.

In the month of November in year 2005, there were overbought in the markets. Therefore, an assortment of futures of long US dollar index declined. A drop was also noticed in the price index.