Follow the Smart Money / COT Analysis

This is a discussion on Follow the Smart Money / COT Analysis within the Futures & Options forums, part of the Markets category; Thanks Samy32 for the compliment! One of the most exciting markets that was mentioned ( ), is the Wheat (Chicago), ...

Reply
 
LinkBack Thread Tools Search this Thread
Old Aug 6, 2012, 8:38am   #25
Joined Jul 2012
Re: Follow the Smart Money / COT Analysis

Dunstan started this thread Thanks Samy32 for the compliment!

One of the most exciting markets that was mentioned (), is the Wheat (Chicago), so today I’ll talk about this market.

On the attached chart I think even someone new to the report should see that we are at an All Time (or to be precise, close to All Time) extreme picture in the Commitments of Traders report on Wheat. It is only the Small Speculators who “still got space” to become All Time extreme, but still they are also very extreme.

I have also drawn on the price chart those places in time, when the COT picture was similar. This picture that we have now can definitely be considered a good signal from COT.

Now obviously I cannot say that this is the time to go short, it is up to you to decide how you wish to interpret the signal, all I’m saying is that the stress level in the market – as cleverly used in the review – is becoming extremely high. It maybe that prices continue further up for a few more weeks, I don’t know, but I do know that it will be this market that I will closely monitor in the near future.

I know that there might be traders now who are viewing my thread and are not comfortable trading futures or options on futures, so my note to them is this: there are ETFs (a great list here) that follow futures contracts and can be traded just like stocks.

The three Wheat ETF that I found:
WEAT: direction - Long / leverage -1x / exchange - LSE
SWEA: direction - Short / leverage -1x / exchange - LSE
LWEA: direction - Long / leverage -2x / exchange - LSE

Please let me know if you have any questions,
Have a great day,
Dunstan
Dunstan is offline   Reply With Quote
Old Aug 6, 2012, 8:38am   #26
Joined Jul 2012
Re: Follow the Smart Money / COT Analysis

Dunstan started this thread sorry, I forgot the chart
Attached Thumbnails
report31_wheat.png  
Dunstan is offline   Reply With Quote
Old Aug 6, 2012, 9:09am   #27
Joined Jul 2012
Re: Follow the Smart Money / COT Analysis

Dunstan started this thread Ok, I thought I’ll show you another market as well, since you might say, that I’m talking too much about wheat

Cocoa was also mentioned in the review, cause the change size in Commercials position was larger than average. It was 28% to be exact. Now this market could be a good example, how to react to a market, where we haven’t got an extreme COT picture. It is only the change in positions that was such that we can talk about it.

I think you should follow the same notes I’ve given earlier, to view this as a confirmation to your existing trading idea or it might just signal an opportunity that you should put in to your system and see whether it should be traded or not.

In the following chart I have indicated similar pictures when Commercial’s changed their net positions this way. I wouldn’t say that this signal is as strong as the one in wheat. If prices react to this and they start to fall, they might just fall to 2000-2100 level, but hey (!), if they do that and you’re in, that’s “fair enough” . Maybe we would get to a level in COT where it is signaling a good buy opportunity…

The four Cocoa ETF that I found:

NIB: direction - Long / leverage -1x / exchange - NYSE
COCO: direction - Long / leverage -1x / exchange - LSE
SCOC: direction - Short / leverage -1x / exchange – LSE
LCOC: direction - Long / leverage -2x / exchange – LSE

Please let me know if you have any questions,
Have a great day,
Dunstan
Attached Thumbnails
report31_cocoa.png  
Dunstan is offline   Reply With Quote
Old Aug 8, 2012, 10:19pm   #28
Joined Nov 2010
Re: Follow the Smart Money / COT Analysis

This is not new, the COT report has been out for decades and is available to anyone. If you think that can give you an edge you are having a laugh.
MacroStyle is offline   Reply With Quote
Old Aug 9, 2012, 9:06am   #29
Joined Jul 2012
Re: Follow the Smart Money / COT Analysis

Dunstan started this thread Hi MacroStyle,

Thank you for your view on the topic. If I may reply to the two points of yours…

First of all, you are right that the report is not new and that it is available to anyone. I have never said that the report is new and I have precisely given the source (CFTC) where it can be found. Second of all, your view is that the COT report cannot give a trader an edge, so to say, knowing that for example Commercial participants in the Wheat market are net short 40.000 contracts and that Large Speculators are holding so many contracts net long as never before… that this information is irrelevant? Well I don’t think so, but it is the freedom of any trader to decide what information they believe has value and what does not. My view is that these kinds of information contain value which can help achieve better results in trading.

To get back to your first remark, I think that just because the report has been out for such a long time does not necessarily conclude that everyone should know about it. In my experience, talking to dozens of traders, the majority of them have never even heard about the report. I’m glad that you are not one of them and actually I would much appreciate it if you could share with us your experiences using the report in your trading. Maybe by doing so, I could highlight you some mistakes that you might have made in the implementation of the report, thus you might change your view on the usefulness of the report in time.

Have a great day,
Dunstan
Dunstan is offline   Reply With Quote
Old Aug 9, 2012, 11:30am   #30
Joined May 2012
Re: Follow the Smart Money / COT Analysis

Dunstan,
Please ignore the silly remarks on this thread and continue.
I find your analysis and comments enjoyable, educational and useful
You are doing a brilliant job !
Thankyou for the time and effort you put into it.
justtrader is offline   Reply With Quote
Old Aug 9, 2012, 11:47am   #31
Joined Jul 2012
Re: Follow the Smart Money / COT Analysis

Dunstan started this thread Hi justtrader,

I’m very happy that you are satisfied with my thread, I’ll do my best to keep it that way

Thanks for your support,
Have a great day,
Dunstan
Dunstan is offline   Reply With Quote
Old Aug 9, 2012, 11:55am   #32
Joined Nov 2010
Re: Follow the Smart Money / COT Analysis

The information within the report is relevant but because its used by the majority of major market particiants i have never found it that useful in terms of actual trading.

I have previously used the data in the following way:

(Large spec longs - large spec shorts) / open interest then normalised over a 5 year period using a percentile method. The idea being to call tops and bottoms when specs are max long or short.

I made a spreadsheet a few years that feeds all the data in from bloomberg and does the calcs for all the contracts.
MacroStyle is offline   Reply With Quote
Reply

Thread Tools Search this Thread
Search this Thread:

Advanced Search

Similar Threads
Thread Thread Starter Forum Replies Last Post
The Smart Money megamuel General Trading Chat 16 Jul 26, 2010 12:37pm
Smart money, Pro's and institutions..... the blades General Trading Chat 10 Mar 20, 2007 11:11am
Smart Money Index darth trader Indices 5 Feb 23, 2005 7:32pm
Smart Money Dumb Money MX Psychology, Risk & Money Management 5 Feb 4, 2001 10:39pm

Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)