Have any of you looked at Committment of Traders ?
It's essentially the direction the commercial futures traders are taking on various commodities including currency. I've only just started looking at this with the view of gaining insight on short/medium direction of a particular currency.
For those mildly interested, I've put up a flash based file from Peter Bain's site at https://www.mql5.com/go?link=http://www.cooney.com.au/FXMentor/cot/cot-how-to-read.htm and the latest COT charts can be viewed at https://www.mql5.com/go?link=http://www.cooney.com.au/cot/COT_example.htm. The latter are current graphs as of last Friday which are taken from data the previous Tuesday.
I'd be interested to hear comments from those who maybe are using COT as well as how traders aply this data i.e. timeframes, strategies etc.
I think COT could be used as a great tool to trading though I'm still out of my depth in relation to the practical application.
At first I was impressed with the mentor about the divergence of price index and comm index, but now it seems to me that the commercial contracts give little impact on the price index. It is not divergence, but the commercial traders long or short the currency in the opposite direction of price index. Take a look at GBP indexs:
You can see the price index and comm index move in the opposite at the same time, meaning the those commercial traders also react to the climate the same way as speculators and small traders. Did the mentor something like "the price moves smoothly to the direction of commercial traders after some weeks" ? He's wrong, I think.
I heard the mentor also mentioned that "commercial traders who trade millions of dollar don't care about the direction of price." I think this point is totally wrong. Commercial traders are very well-aware of the direction of price, and they react to it promptly.
The commercial traders referred to here though are Commercial Futures traders. I've been looking back at price action in relation to the extremes on these graphs and there definitely is a correlation. The timing and volatility of the moves is something I've yet to nail down but I'm certain there's something to it.
It's the extreme points of the Commercials that I'm referring to in the graphs.
Peter Bain gives a trade idea ("THE BIG CLUE" in his term) in his book "How to trade forex like a Pro in One Hour". When comm. index and spec index are at oods with each other and at the extreme, the price will reverse. This is because the extreme opposite idea of speculators and commercial traders.
According to his idea, now we can expect EUR to shoot up and USD to shoot down soon, as you can see in COT EUR-FX and DOLLA. Wow! then that EURUSD would sharply shoot up to the sky!
OK so I get the impression you don't warm to the idea then
I still think there's something to the idea and have attached a rough plotting of past extremes on the GBPUSD if anyone's interested.
Maybe this is the wrong place to discuss this stuff ??? Sorry if it is.
Kewl! By what I can tell from the COT GBP Index is that GBPUSD will be shooting up from now, coz comm. and spec. index are at the opposite extreme. Thanks Rastarr for bringing up a really good topic.
I have the COT subscription from Shatterfield:: The Commitments Of Traders Data Source and find it very valuable for trading. Be sure to check out the synthetics. Its worth it to have the data and custom indicators in metatrader or whatever your platforum.