How to use COT Report to gain profit in forex online trading – example story

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 :
cot report 2011

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

How to use COT report to make profits in forex trading ?

“The foreign exchange earnings COT is a course of education and monthly subscription service, Frank Paul, a member of the ForexMentor” of the family. “The course teaches how to read the weekly Commitment of Traders report (published by the U.S. Commodity Futures Trading Commission), which shows how traders (traders volume higher) are placed on the market.

These data are, in my opinion very difficult to interpret and COT currency gains not only teaches you to understand the data, but also a monthly subscription service where Frank offers videos every weekend with the graphics and COT data covering 12 markets .

Paul Frank shares his experience in the analysis of 12 markets from COT data and Elliot Wave analysis. 8 of the markets are the main instruments of change and are the other 4: Gold, Silver Light Sweet Crude Oil and the Dow Jones Industrial Average.

How can this help your trading?

If you use a mechanical “black box” strategy, then you probably will not benefit much from the base. If you are an intraday trader using the graph of 1 hour or 4 hours, then this can be a great advantage. You can use the TOC service to see the bigger picture of what is happening in the market and be aware of the key issues affecting the markets where they go.

I personally use the service to establish a bias on which way the market goes on a weekly basis. This complements my technical approach to a large extent, when intra-day my system gives me a signal to enter the market for the first time confirmed the TOC service.

It is important to be aware of what is happening in the daily / weekly charts, although they are negotiating the 15 minutes or an hour. You can lose a trade that looks perfect on the 15 minute chart as they are aware that only reached a significant level in the daily charts, weekly or monthly.

Another great advantage is that you can get a “heads up” before major market turns. In general, are traders who move the market and know which direction they are placed can avoid being part of the loss of 95% of retailers.

Personally I do not want the TOC analysis every week and although I think Elliot Wave works (if you are an expert in the interpretation of it), I have no desire to spend my time planning this. Paul Frank offers an incredible service with the release of videos every week and for members $ 99 a month I think is an amazing value.

If you really want to learn how to trade forex successfully, then it is a great advantage having a bias in what way the market is headed. In my opinion, really delivers COT Forex Mentor in providing consistently accurate bias (not 100%, of course).

We plan to offer you free course and free articles to teach you to watch COT report and make profits. Soon we will publish new articles.

Example :
COT report that shows in May YEN bullish :

More informations in next articles.