Basic Techniques  |  OCT 2006

Watch The Commercials by Sam Bhugaloo

Stocks & Commodities V. 24:10 (24-32): Watch The Commercials by Sam Bhugaloo The Commitments Of Traders report has long been used among futures traders. Here’s why you should follow the commercials and how you can incorporate the information into your trading plan. An important feature of the futures markets is the relationship between hedgers and speculators. Commercial traders are hedgers in the futures markets, while speculators are noncommercial traders. The Commodity Futures Trading Commission (CFTC), the government regulatory authority for the industry, registers all futures contracts. The cost for registering is higher for speculators than for hedgers. Thus, those traders who are producing or processing large amounts of commodities register as commercial traders. All other traders are either large noncommercials with many contracts traded at a time or traders with only a few contracts. If used correctly, the Commitments Of Traders (COT) report is a powerful tool that will allow traders to predict potential bullish trends or market tops by examining extreme levels of bullishness or bearishness. Many traders follow the large speculators, but this may not produce the expected results. Here’s why you should follow the COT commercials and incorporate this into your trading plan.

by Sam Bhugaloo