In this article we would like to introduce you to our COT-Strategy. This is one of our major strategies that allowed us to increase our trading capital from $ 14.000 to over $ 430.000 within just 4 years. In 2017 we participated in World Cup Championship of Futures Trading® and won the 3rd place by achieving a 111% profit.
Trends are created by fundamental data and not by charts.
We believe, the market trends arise from the fundamental market changes and not from the changes on the chart. Accordingly, we build our strategy based on the COT data that originates from the weekly Commitment of Traders Report. It includes the up-to-date positions of reportable marker players. The goal of the Commitment of Traders Report is to provide transparency in regard to open and outstanding options and future contracts on the market. The data is published each Friday after the close of trading session. In this way, all other market players can understand the positioning of the big trader groups (commercials, large traders and small traders).
We took advantage of this information and evaluated the behavior of these three groups using the COT reports from 1983 to 2013. The analysis showed us how the big players position themselves before rally. This information is the foundation of our trading strategy. We call it COT-signal. Every Sunday we analyse 30 futures markets for such signals. Figure 1 shows COT-signals for the cocoa market. Red arrows show signals for going short (short signal) and green ones for going long (long signal). As you can see on this figure, the COT-signals are very reliable, especially if they match the weekly trend.
Once a COT-signal is present, we proceed as follows:
Step 1 of 8: Weekly Trend.
After getting a COT-signal, we first verify the weekly trend. As already mentioned, signals are more reliable if they match the trend direction.
Step 2 of 8: Commercials and Open Interest.
In addition to step one, we take a closer look at the “open interest” and the “commercials” (Figure 2).
Step 3 of 8: Sentiment.
COT-signal can be verified by the…..