COMMITMENT OF TRADERS (COT) SENTIMENT CHART
WHAT DOES IT MEASURE?


The Commitment of Traders (COT) Sentiment indicator measures how bullish or bearish large institutional forex investors are toward a particular currency.

Each week---on Friday---the Commodity Futures Trading Commission (CFTC) releases the COT report. This report provides a breakdown of who is buying contracts and who is selling contracts. These numbers reflect the information from the previous Tuesday. Everybody hates the delay in information, but the CFTC still insists on holding the information for three days.

We have taken this information and created the COT Sentiment indicator to help you profit from this information in your forex investing.


WHY IS IT IMPORTANT?

Large, institutional investors drive the movement of currencies in the forex market. When they decide to buy a currency, the value of that currency rises. When they decide to sell a currency, the value of that currency drops.

If you can see what the big investors are doing, you have an opportunity to get out in front of them and take advantage of the price movement they are going to generate.


HOW TO USE IT



The COT Sentiment Indicator measures sentiment in two ways: it illustrates if investors are net long or net short their positions and it illustrates the strength of their commitment.



Net Long vs. Net Short---Net long means more investors are buying the currency than are selling the currency. Net short means more investors are selling the currency than are buying the currency.



The black line on the COT Sentiment indicator illustrates if investors are net long or net short their positions.



If the black line is above the horizontal grey signal line, investors are net long their positions.

If the black line is below the horizontal grey signal line, investors are net short their positions.



Strength of Commitment---Knowing whether investors are net long or net short their positions is only part of the equation. You also need to know how commited they are to their current positions. Are they net long but starting to doubt the validity or their position, or are they net long and continuing to add on to their position.



The orange line on the COT Sentiment indicator illustrates how confident investors are in their positions.



If the orange line is above the horizontal grey signal line, investors are still confident in their positions.

If the orange line is below the horizontal grey signal line, investors are losing confidence in their positions.



You can also watch the trend of the orange line to give you advanced warning of how investors feel about their positions.



If the orange line is above the horizontal grey signal line and is trending down, you know investor sentiment may be turning negative.

If the orange line is below the horizontal grey signal line and is trending up, you know investor sentiment may be turning positive.



Make sure to check the Bond Yield Seesaw regularly to see if the bond yields have changed and what that might do to your trades.


EUR/USD
GBP/USD
USD/CHF
USD/JPY
USD/CAD
NZD/USD
GBP/JPY

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