Trading Techniques  |  JUL 2002

Analyze Net Positions by Jon D. Andersen

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.

by Jon D. Andersen