How to Compile and Use a COT CFTC Report for Trading
Table of Contents
Introduction to COT Reports
The Commitments of Traders (COT) report is published weekly by the Commodity Futures Trading Commission (CFTC). It provides a breakdown of the aggregate positions held by different types of traders in US futures markets, including currency futures traded on the CME.
The COT report reveals what large speculators and commercial hedgers are doing in the market. Understanding extreme positioning can help you anticipate potential market reversals.
For forex traders, the COT report offers valuable insights into how institutional traders are positioned in major currency pairs. This positioning data can signal when markets are overextended and due for a correction.
- Release schedule: Every Friday at 3:30 PM ET
- Data cutoff: Tuesday of the same week
- Coverage: All major currency futures
- Source: CFTC (cftc.gov)
Understanding the Data
The COT report categorizes traders into different groups, each with distinct trading motivations and behaviors.
Trader Categories
- Commercial traders: Hedgers using futures to offset business risk (often fade trends)
- Non-commercial (speculators): Large speculators like hedge funds seeking profit (trend followers)
- Non-reportable: Small traders below reporting thresholds
- Leveraged funds: Hedge funds and CTAs in disaggregated report
Non-commercial (speculative) positions are most useful for forex traders. When speculators become extremely long or short, the market often reverses as positions unwind.
Key Metrics
Focus on these key measurements:
- Net position: Longs minus shorts for each category
- Weekly change: How positions changed from previous week
- Open interest: Total number of outstanding contracts
- Historical extremes: Compare to 1-3 year positioning range
Compiling Your Report
Creating a useful COT trading tool requires organizing the raw data effectively.
Step-by-Step Process
- Download data: Get the legacy or disaggregated report from CFTC website
- Extract currencies: Pull data for EUR, GBP, JPY, CHF, CAD, AUD, NZD futures
- Calculate net positions: Long contracts minus short contracts for speculators
- Track weekly changes: Note increases or decreases in positioning
- Create percentile rankings: Where does current positioning rank historically?
Create a spreadsheet that automatically updates with new COT data. Track 52-week and 3-year percentile rankings for each currency to identify extremes.
Useful Calculations
- Net position: Non-commercial longs - Non-commercial shorts
- Positioning index: (Current - 52wk low) / (52wk high - 52wk low) x 100
- Weekly momentum: This week net position - Last week net position
- Sentiment score: Normalize positioning from -100 (max short) to +100 (max long)
Trading Applications
There are several practical ways to incorporate COT data into your trading.
Strategy 1: Extreme Positioning
- Identify extremes: Look for positions above 90th or below 10th percentile
- Wait for catalyst: Extreme positioning alone is not enough; wait for trigger
- Trade the unwind: When positioned traders start exiting, ride the reversal
- Risk management: Use wide stops as unwinds can be volatile
Strategy 2: News Trading Enhancement
Combine COT data with news trading for amplified moves:
- Crowded positions: News against crowded positioning creates outsized moves
- Stop hunting: Speculators will be forced to exit on adverse news
- Example: If speculators are heavily long EUR and ECB is dovish, expect amplified EUR selling
- Timing: Use COT for direction, news event for entry timing
COT data has a 3-day lag (Tuesday cutoff, Friday release). Position changes during the week are not captured. Use as a backdrop, not real-time signal.
Strategy 3: Trend Confirmation
Use positioning changes to confirm trend strength:
- Increasing longs in uptrend: Confirms trend has institutional backing
- Decreasing longs in uptrend: Warning sign of potential reversal
- Building shorts in downtrend: Confirms bearish sentiment
- Short covering in downtrend: May signal bottom forming
Practical Tips
- Compare currencies: Look for divergences between positioning and price
- Combine with technicals: Use COT extremes at key support/resistance
- Monitor open interest: Rising OI confirms trend, falling OI warns of reversal
- Be patient: Extreme positions can become more extreme before reversing
