Analyze Net Positions by Jon D. Andersen
Commitment of tradersİ (COT) data has, for many
traders, been difficult to understand and apply.
This has largely been because access to usable
forms of the data has been limited, and analysis
techniques have been sparse. However, the COT
does provide useful information for understanding the
dynamics of the futures markets.
In this article I will offer examples of analysis techniques
for net positions between commercial, noncommercial (or
large speculator), and small traders. Plotting the difference
between the positions of these speculators provides a vast
amount of useful information. Analyzing the net positions of
the trader groups reveals what each group is doing. Are they
adding to long positions? Are they selling long, adding to
short positions, or reducing short positions? This information
is useful because, generally speaking, each group takes
positions for different reasons. As a result, you can see who
the habitual losers and winners are for a given commodity,
and thus identify potential opportunities.