Hello Marcus and all. Have a question I have been pondering for a while. Wondering if I might get your point of view or insight, as I do have some knowledge of the COT, but it is nowhere near your expertise. I have heard that hedge /leveraged funds make the faster moves in the markets and that asset managers and commercials have a much longer-term approach, 6 months to a year or more. I have noticed in a few graphs where the leveraged funds are meandering around the 0 line or slightly bearish/ longish but not holding many positions meanwhile the non-commercials were completely bearish if the trend was down and vice versa. So what I'm getting at, is should one take into consideration the non-commercials at times or whoever is leading the trend? The top graph is Classic with Financials report in the blue just showing just leveraged funds and non-commercial. Hope I put this clearly across, thnx.
Thnx for your response Jas and informative post Jas. Yes I know leveraged funds are tracked here and in my wanderings around other platforms a couple have said that they follow leveraged funds mostly because they move quicker or more short term in the markets. Yes, that what I was getting at, who is moving the markets and taking all the big players into consideration not just one. I have used Barchart for some time and noticed that the leveraged funds a lot of the times were on the sidelines and just got me to thinking.
I am not sure if I understand your question 100%.
But you are asking, "whether or not you should follow the strongest category of traders (Commercials-'dealers', Asset managers-'non-comm' or leverage-'speculators'). Moreover, you have a cognitive dissonance about, if in case the leveraged funds (blue line) are on side lines and not clearly buying or selling, then why not follow the group with strong buy or sell positioning?
Well, I have had exactly the same conundrum about COT reports and how to use it, and could not 'analyze' my trade SETUPs clearly. At LogikFx, if you followed their COT research and study material, they prefer net positioning of leveraged funds category (blue line in BarCharts graph).
My forex trade process is as below:
(1) Weekly: broad analysis or 28 major cross pairs, monthly and weekly chart: Find the established trend, If and when trend reversal (change is polarity) is probable from swing hi/lo analysis, Macro analysis (HIN high impact reports this week)
(2) Daily: go to daily chart of each pair, perform TLS trend, level and SETUP, find confluence, risk/reward and other stuff. I grade my trade, if it makes sense, I select the pair to trade
(3) Execution: I have done my 'core work' in step 2, now I want to 'enhance my odds' for this trade candidate (FX pair), I go to COT report, to find if leveraged funds are net in my favor or against me. Who are at extremes, are COMM and non-comm far way or crossing? Non-comm flipping against main trend? (I do COT study weekly on Sunday evening)