Using COT report
Because the COT report is a weekly publication that would be more suitable for long-term traders to use as an indicator of market sentiment. So how do we do? Well, besides using the changes in open interest and changes in the number of long and short as a volume indicator, my favorite way to use the COT report is to find extreme net short positions and net long. This can be a great indicator that a market reversal is around, because if everyone is a currency long]

that is left to buy? Nobody. And if everyone is short of money, which is selling? Again, nobody. The only thing that a market can do is go in another direction.

This is a graphic example of the U.S. dollar index.
In the top half of the table we share price index futures dollars with each bar representing weekly data. In the bottom half of the table we have the data on the net long / short positions in three categories: Commercial (Blue), Large non-commercial (green), and small non-commercial (red). Let’s pay attention to the large non-commercial positions as commercial hedging positions and small traders are not really a factor.

Let’s examine this chart and see what we can say. We can see that the career of U.S. dollar a good bull began in early 2005. As the value of net long positions of large speculative traders (green line) increased, so did the price of future dollars. In the first week of July 2005, the net long positions increased to 20,000 contracts. This was a central long, shortly after the market began to sell the dollar index futures. The USD price index fell from 91 to 86, but only became a setback in the index are merged to a new height in the level of 93.16 and over 29K contracts net long.
As you probably have asked: “In this spirit, many who left to buy?” Not really too many merchants. With the market appears overbought in November 2005, we began to see the number of futures contracts over USD decline and fall in the price index for the bottom 93 to about 84. Well, you can imagine if you register before this movement?

For now I bet you’re wondering: “I do not operate in the forward foreign exchange spot market. How does this apply to my business?” Good question! Since we’re taking a look at the U.S. dollar, let’s see one of the best vehicles for trading the dollar in the spot currency market: EUR / USD.

If we were to apply what they learned in the previous section, which puts us in the investment market, we could have captured two major movements from July 2005 to May 2006 in EUR / USD.
First, in July 2005 when a trader was the extreme levels of net long index futures dollars, this operator to capture the next possible wave of selling of the greenback by buying EUR / USD. This operator has been proved right, and paid off as this position could have captured more than 700 pips. Again, if this were so astute trader to take the extreme level of dollars on futures contracts in November 2005, the purchase of EUR / USD would be the best option since the couple met about 1.1650 to 1.3000 more .. .. Wowzers! That’s more than 1300 pips won! Thus, between July 2005 and May 2006, a trader could have captured nearly 2000 pips only with the COT report as an indicator of investment in the market.

Example for May 2011 :

This COT report shows that YEN will in next week start bullish trend and AUD bearish trend.