Mining For Gold by Ron McEwan
Here’s how you can use the Commitment Of Traders report to help in trading commodities.
Coffee, oil, sugar, platinum, soybeans, oats, gasoline, and cheese are just a small handful of commodities you can trade. One of the most valuable data resources for traders today is the Commodity Futures Trading Commission’s (CFTC) Commitment Of Traders Report (COTR). The CFTC generates volumes of data on a daily basis, including the COTR that many are familiar with. On a weekly basis, the CFTC updates and makes available seven historical compressed COT reports, which are:
1. Disaggregated Futures Only Reports
2. Disaggregated Futures-and-Options Combined Reports
3. Traders in Financial Futures; Futures Only Reports
4. Traders in Financial Futures; Futures-and-Options Combined Reports
5. Futures Only Reports
6. Futures-and-Options Combined Reports
7. Commodity Index Trader Supplement
The amount of data is tremendous. In one month, for example, these seven reports include approximately 700,000 data points for more than 500 contracts. This is quite a large amount of information to try and analyze for trading ideas, but more than worth the effort.
Most of the COT analysis you find on the Internet will focus on these categories:
• Long report
• Open interest
• Nonreportable positions
• Number of traders
• Reportable positions
• Short report
That gives us about 29,000 data points used in all the reports. Most of the data is generally ignored by COT analysts. Do we need the rest of the data? Are we to assume that the CFTC has a number of people simply generating large reports? I don’t think so. The data generated by the CFTC is a gold mine of information. Unfortunately, you need to do some digging to find the nuggets.
These days, if you have a personal computer, a spreadsheet program, and an Internet connection, you can now apply some extremely powerful data mining tools to the reports to automate the search for the valuable relationships hidden in them.