In my world of trading Forex, one of the greatest tools I have at my disposal in the CFTC CoT report. It contains the positions of the biggest players in the markets and it sound like a gold mine, right? Well that's what you'd think until you look through the data and try to understand if the banks are long and they are looking to get out or if their long and looking to get in more, or maybe they want to start shorting or maybe their hedging!?!?
Trying to understand the banks and how they move their positions around is a very monumental task. I know because this has been my challenge for many years. I have been relentlessly inputting the data in my spreadsheets week after week and then spending hours contemplating why the banks are doing what they are doing.
What I have learned is this:
1) The banks are very tricky with how they move price around the charts.
2) They hold massive positions so they it takes many weeks for them to accumulate positions and distribute those positions to the market.
3) Even though there is a 3 day delay on the data being released it does not make much difference in being able to determine their next move and in fact, the 3 day delay is done for a reason and you may not know why that is, but you should.
4) They are masters of creating artificial situations in the markets in order to facilitate their order fills.
5) If you don't know their tricks, you will be caught misreading the data and will trade on the wrong side of the institutions.
There are many more things I could share with you in this journal entry but to keep things simple, the point I'm trying to get across to you is that reading the reports is no easy task.
The main reason is that looks can be deceiving and the big players know this and they also know that most traders will never spend the time to actually read deeper into the data and be able to decode it's true meaning.
Looks can be deceiving and the big players know this
Should this discourage you, I hope not because the answers are there but it will take time to be able to read the report in such a way that they will act like a map to what the banks have planned. It is not easy and it may take years to become very good at it but you need to be taught what to look for and be shown the trickery as it happens, time after time for you to be able to learn from your own experiences. I will share more on this topic on future posts, make you you check them out because they will be revealing!