Unconventional Fundamental Analysis. Part 1
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Thread: Unconventional Fundamental Analysis. Part 1

  1. #1

    Unconventional Fundamental Analysis. Part 1

    Hi there!

    Many traders submit that fundamental analysis is important, but for vast majority of trading community fundamental analysis equals to reading public economic releases – «Nonfarm payrolls», «Housing sales» e t.c.

    In fact, expectations of those economic releases are in most cases already included in the price of currency pair that trader wants to analyze. Having edge in trading fundamental information is probably the most challenging and difficult task in Forex trading.

    Yet, there are methods that are undervalued by Forex traders and while they can be more useful in most cases, because they reflect real supply and demand flow.


    COT analysis:

    Analysis using «Commitment of Traders» is described in this thread
    http://forum.roboforex.com/threads/2...t-participants

    Now let’s take a closer look at this instrument and try to determine – how to extract useful information from COT reports?
    First of all, you should remember that COT reports reflect changes in positions of market participants in futures market that is used for hedging.

    COT reports are available for free on official website of CFTC and looks like you see on screenshot below:

    COTreport example.png

    Report itself is hardly readable – all you see here is just numbers and they don’t make sense if they are not compared with previous numbers. What we really want to know – how these numbers change.

    This report shows us market sentiment – but not with polls, but with real market stakes. In other words – who are risking money and how much?

    Some websites and services provide free access to convenient and visual way for reading data from COT reports, for example «timingcharts» service:

    euro_report.png

    There are 3 basic lines - they reflect changes in positions of market participants - blue line is commercial players (institutional - banks, companies), red line shows "small specs" (retail traders), green shows large speculators (hedge funds e t.c.)

    If you see that commercial player accepts «huge loss» on future market, be sure that he will cover his loss at the spot market, yet we don’t have information about their purchases in the spot market. But trader should avoid moving with commercial players, because they are hedging risk, not speculating.

    Maybe trader should trade in sync with large speculators when they are accumulating their positions?
    Well, that can be reasonable, but it will be tough to find right timing for such trade, because it’s often tough to determine intentions of large speculators – we often see it afterwards.

    Maybe, we should fade small specs? This idea seems more reasonable especially in the context of notoriously known data, that most of self-managed traders are losing money in the long run. You may notice that when positions of small speculators were at their highs, market was too overbought and eventually liquidated, and when small specs became "net short" heavily, market also liquidated to the upside.
    So, idea is that you identify overcrowded markets and go against the herd:

    COT.png
    Last edited by Value trader; 12-17-2013 at 02:23 PM.

  2. #2
    I make reference to COT just to have the idea of market sentiments and the positions held by the big players but I do not base my trade decision on this information at all. I prefer yo trade what I see based on he way I view the market according to my on analysis of the market.I have learned from this thread that I can not just follow these institutional investors hook and liner sinker.

  3. #3
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    Quote Originally Posted by layigold View Post
    I make reference to COT just to have the idea of market sentiments and the positions held by the big players but I do not base my trade decision on this information at all. I prefer yo trade what I see based on he way I view the market according to my on analysis of the market.I have learned from this thread that I can not just follow these institutional investors hook and liner sinker.
    if I'm not mistaken understanding the COT over a trade involving transactions recorded transaction data in and out of this and many are taking as a benchmark for trade buyers and sellers look at the number and value of contracts that exist, but because the data is only in the United States alone it is not a section is too valid to decide to open a trade position with existing data in the COT

  4. #4
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    You post has provided a lot of insight for me on how to better exploit market opportunity with such an information of being updated on the cot weekly report, which is good but its a lagging tool hence it just tells us of what happened the previous week and not current market activity, although the point you made about if the commercial players enduring much losses, they'll defiantly pull the price back,hence they provide liquidity.

  5. #5
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    I talk about COT just to have the concept of industry emotions and the roles organised by the big gamers but I do not platform my business choice on this details at all. I choose yo business what I see depending on he way I perspective the industry according to my on research of the industry.I have discovered from this line that I can not just adhere to these institutional traders connect and lining sinker.

  6. #6
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    This is very informative thread containing huge learning elements. Through this thread try to learn about the issue, but it seems to me a little bit harder to understand. May be my less knowledge and skill are the main hindrance to understand it. Yet, I learned a lot from this thread and hope to continue such types of learning tools on a continuous basis.

  7. #7
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    Quote Originally Posted by rai504 View Post
    I talk about COT just to have the concept of industry emotions and the roles organised by the big gamers but I do not platform my business choice on this details at all. I choose yo business what I see depending on he way I perspective the industry according to my on research of the industry.I have discovered from this line that I can not just adhere to these institutional traders connect and lining sinker.
    The COT is a tool that is limited to see the volume of transactions in the market because this is just a list of transactions that enter the American market and are not found in other countries so I think that you might need a analysis with other tools as well, despite being able to see how many transactions, contracts and so on

  8. #8
    This is educational line that contains large understanding components. Via this particular line attempt to find out about the problem, however it appears to me personally a bit tougher to comprehend. Might be my personal much less understanding as well as ability would be the primary barrier to comprehend this. However, we discovered a great deal out of this line as well as aspire to carry on this kind of kinds of understanding resources on the constant foundation.

  9. #9
    your point of view can although and its good, but I have any other learning when you begin the analysis presented and what was you must know the dear not easier and you must to take persontly and keep it to show to others might tell you the this type of analyzes but not to explain the displayName I don `t with it when you are learning and I do know this analysis because it is not easy to

  10. #10
    That is quite informative wire that contain massive linguistic elements. Across this thread trying to meet the subject but I think that a bit more hard to to understand. May be less than me awareness and ability are the main obstacle understand.

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