How To Read The Commitment Of Traders Report

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Last night was a tough night…I will post those trades later. Tonight is looking like there might be some opportunities.

In doing some pretrade analysis, in the futures world, the ‘smart money’ seems to be very long the dollar (the red line on the chart). The ‘dumb money’ (blue line) is very short.

Whenever there is a big divergence like this, it usually a sign that you should take a position with the smart money. Now I’m no expert on this, but this would lead me to believe that the slide in the dollar is coming to an end for the short term, or at least taking a break. So I should lean more towards positions that are long the dollar, all things being equal.

A sample COT graph

If you haven’t checked out these commitment of traders reports, they are great and only cost $4.95 / month.

http://www.cot-futures.com/cot/index.htm

Especially if you trade futures, these charts are a must have…and I don’t make any money by saying that.

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