COT

REPORTS
HOW TO READ
A COMPLETE GUIDE
FOR RETAIL TRADERS

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Welcome to
'How to Read my COT Reports:
A Complete Guide for Retail Traders'

I am thrilled that you have decided to invest in your

trading education by purchasing my premium content.
This eBook (*pdf) is designed to teach retail traders like
you how to read and understand the Commitment of
Traders (COT) reports.

These reports are a valuable tool for understanding

market sentiment and positioning, and can help you
make more informed trading decisions.

In Part 1, I will cover the basics of the COT reports.

I will explain where the data comes from, how it is
provided, and what it is used for. I will also explain in-
depth the columns in the COT reports and how to
interpret them.

In Part 2, I will dive deeper into the COT reports by

introducing you to my Simplified version of the reports
and how to use the colors in them.

Finally, in Part 3, I will show you how to analyze the

relationship between a currency's COT report and its
candlestick chart.

Thank you for choosing my premium content, and I am

confident that you will find it useful in your trading journey.

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LEARN HOW TO READ
THE COMMITMENTS OF TRADERS REPORTS

PART I
Introduction to COT Reports

Learn how to easily interpret the COT Reports and

incorporate them into your trading strategy with this
simplified guide, available in PDF format.

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WHERE DOES THE COT DATA COME FROM?

The Commodity Futures Trading Commission

(Commission or CFTC) publishes the Commitments of
Traders (COT) Reports to help the public understand
market dynamics.

The Commodity Futures Trading Commission (CFTC)

is an independent government agency in the United
States that is responsible for regulating futures and
option markets. The CFTC was established in 1974
under the Commodity Futures Trading Commission Act,
and it is responsible for protecting market users and the
public from fraud, manipulation, and abusive practices
related to the sale of commodities and financial futures
and options.

The CFTC oversees and regulates futures and options

trading on exchanges such as the Chicago Mercantile
Exchange (CME) and the Intercontinental Exchange
(ICE), as well as commodity pool operators, commodity
trading advisers, and other market participants.

The CFTC also enforces rules and regulations to

ensure the financial integrity of the futures markets and
to protect market participants from overall risk.

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The CFTC works closely with other regulatory

agencies, such as the Securities and Exchange
Commission (SEC) and the National Futures Association
(NFA), to ensure that the markets it oversees are fair,
transparent, and efficient.

HOW IS THE COT DATA PROVIDED?

The Commitment of Traders (COT) data used in COT

reports is collected by the Commodity Futures Trading
Commission (CFTC).

The CFTC requires all futures commission merchants

(FCMs), which are firms that act as intermediaries
between traders and the futures exchanges, to report
their customers' futures and options positions to the
CFTC every week. The CFTC then compiles this data and
releases the COT reports, which provide a breakdown of
the open interest in futures markets by different types
of traders, including commercial and non-commercial
traders.

Generally, the data in the COT reports is from Tuesday

to Tuesday and released Friday at 3:30 PM Eastern
Time. The CFTC receives the data from the reporting
firms on Wednesday morning and then corrects and
verifies the data for release by Friday afternoon.

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The reports provide detailed information about the
number of open contracts, the total number of long
and short positions held by different types of traders,
and the percentage of total open interest held by each
category of trader. This data is available for a wide range
of futures markets, including agricultural products,
energy, metals, and financial instruments.

THE SIMPLIFIED VERSION OF COMMITMENT OF

TRADERS COT REPORTS

First, the COT Reports are divided into many

categories and what I am doing is to take the data from
the CFTC (including historical data) and to create the
simplified version, the detailed version, and the chart
version of the COT reports.

The purpose of all versions of the Commitment of

Traders Reports is to help retail traders in understanding
market dynamics by providing an easy-to-read format
that displays historical data on a single page.

WHAT DO THE COT REPORTS SHOW US?

The COT reports can give traders an insight into the

positioning and sentiment of different types of market
participants. The data in the report is categorized by
trader types, such as commercial hedgers and non-
commercial speculators, and by reportable and non-
reportable positions. By looking at the Net Positions of
these groups, we can get an idea of the market
sentiment and if a particular group is bullish or bearish
on the market.

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COMMERCIAL & NON-COMMERCIAL

Who are they?

COMMERCIAL TRADERS

Commercial traders, also known as commercial

hedgers, are individuals or organizations that participate
in the futures market to manage the financial risk
associated with their regular business activities. They are
typically producers, processors, or users of a particular
commodity, such as farmers, manufacturers, or airlines.
They use futures contracts to lock in prices for the
commodities they will buy or sell in the future, in order
to reduce the risk of price fluctuations.

They are different from speculators, who enter into

futures contracts to profit from price changes, rather
than to hedge against risk.

NON-COMMERCIAL TRADERS

Non-commercial traders, also known as speculative

traders, are individuals or organizations that participate
in the futures market for the purpose to profit from
price changes, rather than to hedge against risk.

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They include professional traders, hedge funds, and
other financial institutions. They use futures contracts
to speculate on the direction of prices, rather than to
hedge against price risk. They can be either buyers or
sellers of futures contracts, taking long or short
positions, depending on their market outlook.

Again, they are different from commercial traders,

who enter into futures contracts to manage the financial
risk associated with their regular business activities.

CONCLUSION

In summary, the Non-Commercial Simplified COT

Reports are of particular interest as they provide insight
into the actions of major market participants, who have
the ability to significantly impact price movement. The
direction of their positions can indicate the direction of
market movement.

COT REPORTS | MY SIMPLIFIED VERSIONS

My Simplified Version of the COT Reports includes

past data (non-commercials, futures-only), allowing you
to gain a historical perspective on the market. It's
important to note that all reports cover data from the
past year up to the present date.

For instance, let's take a look at a report and I will then

go through each column to explain its meaning.

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COT Report | Simplified Version | Example

Let's break it down and I will explain the significance of

each column individually:

Date
Longs
Shorts
Change Longs
Change Shorts
Net Positions
% Open Interest Longs
% Open Interest Shorts
Open Interest

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DATE

Represents the last day on which the COT data was

collected. We already discussed that the COT data is
collected from Tuesday to Tuesday, and is released on
Friday (3:30 p.m. Eastern time).

LONGS

The "Longs" field in the COT report shows the total

number(*contracts of 100.000) of outstanding long
(buy) positions held by non-commercial traders. This
number represents the total number of futures
contracts that have been purchased by speculative
traders, who expect the price of the underlying
commodity to increase.

Ex: A high number of long positions held by non-

commercial traders can be an indication of bullish
sentiment in the market, as these traders are betting on
prices to go up.

SHORTS

The "shorts" field in the COT report shows the total

number(*contracts of 100.000) of outstanding short
(sell) positions held by non-commercial traders. This
number represents the total number of futures
contracts that have been sold by speculative traders,
who expect the price of the underlying commodity to
decrease.

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Ex: A high number of short positions held by non-
commercial traders can be an indication of bearish
sentiment in the market, as these traders are betting on
prices to go down.

CHANGE LONGS

The "Change Longs" field shows the change in the

number of long (buy) positions held by non-commercial
traders, from one week to the next.

Simply said, it shows how many longs have been

opened or closed in the last week (since the last report
was published).

CHANGE SHORTS

The "Change Shorts" field in the Commitment of

Traders (COT) reports shows the change in the number
of short (sell) positions held by non-commercial traders,
in a particular market from one week to the next.

Simply said, it shows how many shorts have been

opened or closed in the last week (since the last report
was published).

Both 'Change Longs' and 'Change Shorts' are calculated

by subtracting the number of long/short positions held in
the previous week from the number of long/short
positions held in the current week.

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NET POSITIONS

The "Net Positions" field shows the difference

between the number of long positions and short
positions held by a specific category of traders, for
example, non-commercial or commercial traders.
Of course, in the simplified version we are talking about
non-commercial traders. The 'Net. Pos." column is
calculated by subtracting the number of short positions
from the number of long positions.

A positive net position indicates that there are more

long positions than short positions, which could be an
indication of bullish sentiment in the market. A negative
net position indicates that there are more short positions
than long positions, which could be an indication of
bearish sentiment in the market.

For example, if non-commercial traders in the COT

report have a net position of +10,000, it means that they
have 10,000 more long positions than short positions,
indicating a bullish sentiment in the market. On the other
hand, if the net position is -10,000, it means that they
have 10,000 more short positions than long positions,
indicating a bearish sentiment in the market.

% OI LONGS

The "% Open Interest Longs" field shows the

percentage of total open interest that is represented
by long (buy) positions held by non-commercial
traders.
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This field also provides insight into the proportion of
market participants who are taking long positions in the
market, and it can be used as a measure of bullish
sentiment.

% OI SHORTS

The "% Open Interest Shorts" field shows the

percentage of total open interest that is represented
by short (sell) positions held by non-commercial
traders.

It is calculated by dividing the number of short

positions held by that category of traders by the total
open interest and expressing the result as a percentage.

A high percentage indicates that a large proportion of

market participants are taking short positions and
expecting the price of the underlying commodity to
decrease. A low percentage indicates that a small
proportion of market participants are taking short
positions and expecting the price of the underlying
commodity to increase.

In conclusion, the "% Open Interest Longs/Shorts"

columns represent the percentage of open interest
held by non-commercial traders out of the total open
interest of 100%.

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OPEN INTEREST

The "Open Interest" field shows the total number of

outstanding futures and option contracts that have been
bought or sold, but not yet offset by an opposite
transaction or fulfilled by delivery. It is the total number
of contracts that have been traded in a particular
market and have not yet been closed out by an
offsetting transaction.

This field gives an idea of the liquidity and activity in

a particular market and can indicate whether market
participants are entering into new positions or closing
out existing ones.

For example, if non-commercial traders in the COT

report show an "Open Interest" of 100,000, it means
that there are 100,000 contracts of the underlying
commodity that have been bought or sold by non-
commercial traders but not yet closed out by an
offsetting transaction.

HOW TO READ THE COT REPORTS WHEN

TRADING?

Pay attention when reading the COT Reports!

Why? Because all currencies in the reports are listed in
relation to the US dollar. For example, when analyzing
the Canadian dollar report, you are looking at CAD/USD,
not USD/CAD.

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The same applies when you are checking the Swiss
Franc report, you are looking at CHF/USD, not USD/CHF,
and the same applies to other markets.

Let's take another example using the same scenario

but with a different explanation.

When trading the USD/JPY pair, it's important to

keep in mind that the perspective shifts 180 degrees
when analyzing the Japanese Yen report. This is
because the COT report you are viewing displays data
for JPY/USD, not USD/JPY.

To put it simply, if you plan to go short on USD/JPY,

you should look for an increase in long positions in the
Japanese Yen report. Does it make sense? I am sure it
does now.

WHEN TRADING NON-USD PAIRS

When trading non-USD pairs, it's important to take

into account the strength of both currencies involved.
For example, if you plan to go long on GBP/CAD, you
should aim to see a strong GBP (more long positions
than short positions in the COT report) and a weak CAD
(more short positions than long positions in the COT
report) in order to increase the chances of success.

You can now compare two reports on the same

screen by visiting the COT-Reports.com website "Data
Analysis" section.

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The same applies when you are checking the Swiss
Franc report, you are looking at CHF/USD, not USD/CHF,
and the same applies to other markets.

THE U.S. DOLLAR INDEX

The U.S. Dollar Index is a market index benchmark

used to measure the value of the U.S. Dollar relative to
other traded international currencies.

The index is composed of six currency pairs:

EUR/USD, USD/JPY, GBP/USD, USD/CAD, USD/SEK,
and USD/CHF.

“The index is currently calculated by factoring in the

exchange rates of six major world currencies, which
include the Euro (EUR), Japanese yen (JPY), Canadian
dollar (CAD), British Pound (GBP), Swedish Krona (SEK),
and Swiss franc (CHF). The EUR is, by far, the largest
component of the index, making up almost 58 percent
(officially 57.6%) of the basket. The weights of the rest
of the currencies in the index are JPY (13.6%), GBP
(11.9%), CAD (9.1%), SEK (4.2%), and CHF (3.6%).”
(*according to Investopedia.com).

The U.S. dollar index is also used by traders and

investors to track the value of the U.S. dollar relative to a
basket of currencies and to measure the economy's
import and export activity.

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Congratulations on making it through the first part of
this PDF!

WHAT YOU HAVE LEARNED UNTIL NOW?

1. WHERE DOES THE COT DATA COME FROM?

2. HOW IS THE COT DATA PROVIDED?
3. WHAT IS THE PURPOSE OF THE COT REPORTS?
4. WHO ARE COMMERCIALS AND NON-COMMERCIALS?
5. WHAT DO THE COT REPORTS SHOW US?
6. COMPLETE EXPLANATION FOR THE FOLLOWING
COLUMNS:
DATE
LONGS
SHORTS
CHANGE LONGS
CHANGE SHORTS
NET POSITIONS
PERCENTAGE OF OPEN INTEREST (LONGS)
PERCENTAGE OF OPEN INTEREST (SHORTS)
OPEN INTEREST
7. HOW TO READ THE REPORTS WHEN TRADING A
NON-USD PAIR.
8. HOW TO READ THE REPORTS WHEN TRADING THE
USD.
9. SHORT SUMMARY OF THE U.S. DOLLAR INDEX.

Keep up the good work and stay tuned for the next part
of the lesson...

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PART II

UNDERSTANDING THE COLORS

Learn how to easily interpret the colors in the COT

reports and how to spot potential changes in market
trends.

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UNDERSTANDING THE COLORS

Using colors not only makes the data easier to

interpret but also allows you to quickly spot potential
changes in market trends. Besides that, colors can be
used to highlight important information, such as changes
in the data or significant peaks or drops in the values. It
also helps to ensure that the data is presented in the
most efficient and effective way possible.

Let's take a COT report as an example and I will

explain what each color in the report's columns means.

Example: (CHF) Swiss Franc COT Report

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Let's understand the colors...

LONG & SHORT COLUMNS

The association is straightforward. It's similar to

reading a traditional candlestick chart. Green represents
bullish sentiment, red represents bearish sentiment and
yellow stands for neutral/equilibrium.

For example, when the number of long positions

increases, the report will turn green, indicating bullish
sentiment. If several long positions are closed, the report
will turn red.
On the other hand, when the number of short positions
increases, it indicates a bearish market and the report
will turn red. If several short positions are closed, the
report will turn green.

In summary, the more intense the green color on

longs, the greater the bullish sentiment in the market.
Conversely, the more intense the red color on shorts,
the stronger the bearish sentiment in the market.

I am planning to adjust the way columns are colored in

the COT report. Currently, yellow is set at 50% between
the top and bottom levels of the column. By changing
the threshold for yellow to 30%, it will be easier to spot
changes in market sentiment. It will make the red (on
longs) and green (on shorts) less prominent and only
appear when there are drastic changes.

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CHANGE LONGS

GREEN
When a large number of LONG positions are opened,
the market is seen as bullish. I use the color green to
represent this.

RED
When a significant number of LONGS are closed, I
am using the red color. Why? Because when numerous
long positions are closed, the market is seen as possibly
bearish. To further confirm a bearish move, we also
want to see short positions being opened.

CHANGE SHORTS

RED
When a large number of SHORT positions are
opened, the market is seen as bearish. I use the color
red to represent this.

GREEN
When many SHORTS are closed, I am using the green
color. Why? Because when a large number of short
positions are closed, the market is seen as possibly
bullish. To further confirm a bullish move, we also want
to see short positions being closed.

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SUMMARY

In conclusion, when the color in both the "Change

Longs" and "Change Shorts" columns is the same, it
indicates a strong bullish or bearish sentiment in the
market. It shows the imbalance between long and short
positions and the potential for a significant movement in
the direction indicated by the color. It should be
combined with the Net Position column for clear
confirmation.

Here is a short recapitulation:

CHANGE LONGS
Longs Added = Green (Bullish)
Longs Closed = Red (Possible Bearish)

CHANGE SHORTS
Shorts Added = Red (Bearish)
Shorts Closed = Green (Possible Bullish)

*Please go to the next page for 'NET POSITIONS'

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NET POSITIONS

This column represents the difference between the

longs and the shorts. I use green and red colors to
indicate a change in the ratio between longs and shorts.

It is important to note that when using the colors we

are referring to historical changes and not a value of
zero. Therefore, red does not necessarily indicate a
negative value and green does not indicate a positive
value. The colors indicate bearish or bullish sentiment in
relation to the market trend, not in relation to zero.

For example, even if the "Net Positions" shows +20k

longs, it will be red if it has decreased from +50k longs,
as this represents a significant drop. So, the colors are
related to the market trend, not to zero.

It is an easy concept, I’m sure you understand it.

Congratulations on making it through the second part

of this PDF!

Keep up the good work and stay tuned for the final part
of the lesson...

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PART III

COT REPORTS & CANDLESTICK CHARTS

Let's take a look at how a COT Report and a Candlestick

Chart are related by examining an example.

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COT REPORTS & CANDLESTICK CHARTS

USDJPY CHART by Tradingview.com

The candlestick chart shows the price movements of

the pair, while the COT report provides information on
who is trading the pair and how the market is
positioned.

By analyzing both the COT report and the candlestick

chart, traders can gain a better understanding of the
current market conditions and make more informed
trading decisions.

Let's make a comparison between the Japanese Yen's

COT report and the USD/JPY candlestick chart.

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Here is the JPY's COT report:

Japanese Yen COT Report Example

Quick reminder:

*To avoid confusion, it's important to note that when

we analyze the JPY COT report, it's for the JPY/USD pair,
not USD/JPY. So, the data seen on the report will
appear flipped on the chart. For example, a high
number of shorts in the report (JPY/USD) signifies a
bullish sentiment on the chart (USD/JPY).

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As you can observe on the COT Report, the "Net
Positions" decreased starting with January 5. It has gone
from 50,000 longs on January 5 to 19,000 longs on
March 2. Besides that, shorts have been added from
18,000 to 41,000.

That means we have a bearish view on the report. But

changing the perspective at 180 degrees when looking
at the chart means that USDJPY is bullish.

Now, let's take a look at the USDJPY chart, between

the interval of January 5, 2021 to March 2, 2021.

USDJPY Candlestick Chart by Tradingview.com

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From January 5 to March 2, 2021, the chart shows a
rise in price beginning on that date. During this period,
there were more shorts opened and more longs closed,
resulting in a decrease in "Net Positions" from 50,000 to
19,000, indicating a shift from a bullish to a bearish
market for the JPY against the USD (JPY/USD).

In conclusion, when the JPY is bearish against the

USD (as seen in the JPY/USD COT report), the USD/JPY
trading pair is considered bullish.

To strengthen the above, we can also follow the US

Dollar Index COT Report. A strong US Dollar against a
weak Japanese Yen will lead to a bullish movement in
the USDJPY.

Let's see the report for US Dollar Index:

By examining the colors on the chart, it is evident that

the US Dollar Index has slightly risen compared to recent
weeks. The "Net Positions" have gone from -14,000 to
-10,000, with more longs being opened but no shorts
closed. For me, that's a confirmation!

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FINAL WORDS

I hope this lesson has provided you with the necessary

information and resources to efficiently analyze and
understand the COT reports and improve your trading
methods.

Remember, always do your own research and due

diligence before making any trading decisions.

Thank you for choosing my premium educational content,

and best of luck on your trading journey.

CHECK MORE COOL TRADING STUFF

...

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