This article gives a short history of the Commitment of Traders (COT) Report. IW has built our success on accurate reading of the COT Report. In our trading group, we focus on real market trades based on COT data. Our Members benefit from a basic understanding of the COT Report.
Commodity and Futures Trading Commission (CFTC)
In 1974, the US Congress created the CFTC as an independent authority with the mandate to oversee the commodity and options markets in the United States. They are two important functions of the CFTC oversight of the futures markets: price formation and the reduction of price risk in the futures and options market.
A Short History of the CFTC
The first Commitment of Traders (COT) Report was published on June 30, 1962. That first COT Report included only 13 commodities. The report was proclaimed as an important step “to provide the public with up-to-date and fundamental figures on what was happening in the futures markets”. Back then, the COT Report was published with a significant lag time – only once per month.
Over time the COT Report has undergone many changes. In 2006, regulators even considered the discontinuation of the report, but it continues to serve an important function. The publication schedule was changed from the original monthly release to fortnightly format in 1992. Finally, the report was changed in 2000 to a weekly publication, which is what we have today.
The COT Report represents the situation in the markets at the close on Tuesday of each week. The CFTC receives the data from reportable market participants on Wednesday morning. Then they verify and correct the data for release. Holidays and unusual events may affect the schedule for publishing the COT Report. But typically, the COT report is published on Friday at 3:30 p.m. Eastern time (US) and is available on the CFTC website.
The report can be downloaded in various formats. Here is an example – an outline from the COT report dated 10.09.2019. It shows the soybean market on CBOT (Chicago Board of Trade):
The COT Report is the most informative market report issued by a governmental authority. It serves an important purpose in financial markets and its scope is unique to the USA. Other world markets have nothing comparable.
The COT report presents the positions of the big market players, who really have the ability to move prices.
COT reports are generated for liquid markets, meaning they are 20 or more active traders who exceed certain position sizes or report levels. Report levels are defined specifically for each market. Traders who reach the report level for a market are obliged to communicate those open positions for the CFTC.
Market Analysis and the COT Report
The price of a commodity is always formed by market supply and demand. Extreme positions or rapid changes of big market players are very significant indicators of expected price changes. IW reads the COT Report to detect trends and changing conditions before they are reflected in market price.
Many newcomers to future trading misuse the COT report as a Timing Tool. It is better understood as a Fundamental Tool. IW uses the COT Report as a market sentiment indicator in our fundamental analysis. The market positions of major futures traders signal for us those markets where price changes will likely happen in the near future.
To learn how we use weekly COT Reports for successful commodities trading, become an IW trading group Member. We offer a free trial membership.
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Risk Disclosure: Trading in futures, forex and CFD's involves a high degree of risk and is not suitable for every investor. An investor may possibly lose more than the capital deposited. Only risk capital should be used for trading, or parts of risk capital. Risk capital is money, the loss of which does not change the financial situation or does not affect life. Performance achieved in the past is not a guarantee of future profits.
Hypothetical Performance Disclosure: Hypothetical performance results have many inherent limitations, some of which are described below. The account results presented may vary significantly in gains and losses. One of the limitations of hypothetical results is that they are generated by known historical data. In addition, hypothetical trading does not involve financial risk - no hypothetical track record can represent the financial risks of actual trading. For example, there is a possibility that trading will be suspended or cancelled if losses are incurred, this can greatly change the actual results. Furthermore, there are numerous other factors that cannot be fully accounted for in hypothetical performance when implementing a trading program, and thus can affect actual results.
Testimonials appearing on this website are not representative of other clients and are not a guarantee of future performance or success.