COT Analysis
Commitment of Traders (COT) analysis provides insight into futures market positioning by major trader categories. TradeAnon processes weekly CFTC reports to identify positioning extremes and generate contrarian signals.
Overview
The Commodity Futures Trading Commission (CFTC) publishes weekly reports showing positions held by different trader categories in futures markets. This data reveals how speculators, commercial hedgers, and other participants are positioned, providing valuable context for market analysis.
What This Feature Provides
- Weekly Positioning Data — Net positions by trader category
- Z-Score Analysis — Statistical identification of positioning extremes
- Contrarian Signals — When crowd positioning suggests reversal potential
- Historical Context — Current positions vs multi-year ranges
- Backtested Watchlist — Validated signals with performance metrics
- TFF Disaggregated Data — Detailed breakdown for financial futures
Why It Matters
COT data helps traders:
- Identify Crowded Trades — Extreme positioning often precedes reversals
- Confirm Trends — Positioning aligned with price supports trend continuation
- Time Entries — Extreme readings provide contrarian entry signals
- Understand Market Structure — Who is buying and selling in each market
Trader Categories
Legacy COT Report
The traditional COT report divides traders into two main categories:
Commercials
- Producers, merchants, processors, and users of the commodity
- Generally considered "smart money"
- Typically hedge business exposure
- Tend to be right at extremes
Non-Commercials (Speculators)
- Managed money, funds, and individual traders
- Trade for profit, not hedging
- Often wrong at extremes
- Crowd behavior creates contrarian opportunities
Traders in Financial Futures (TFF)
For financial futures, the CFTC provides more detailed breakdowns:
| Category | Description | Typical Behavior |
|---|---|---|
| Dealer/Intermediary | Banks, swap dealers | Provide liquidity, hedge |
| Asset Manager | Pension funds, mutual funds | Long-term directional |
| Leveraged Funds | Hedge funds, CTAs | Speculative, trend-following |
| Other Reportables | Corporate treasuries, etc. | Mixed purposes |
Leveraged funds are particularly useful for contrarian analysis as they tend to be most extreme at market turning points.
Key Metrics
Net Position
The difference between long and short positions for a trader category.
Net Position = Long Contracts - Short Contracts
Interpretation:
- Positive: Net long (bullish positioning)
- Negative: Net short (bearish positioning)
- Magnitude indicates conviction level
Net Position as % of Open Interest
Net position normalized by total market size.
Net % OI = Net Position / Open Interest × 100
This allows comparison across markets of different sizes.
Z-Score
Statistical measure of how extreme current positioning is relative to history.
Z-Score = (Current Net - Mean) / Standard Deviation
Interpretation:
- Z > +2.0: Extremely bullish positioning (potential contrarian sell signal)
- Z > +1.5: Elevated bullish positioning
- Z between -1.5 and +1.5: Normal range
- Z < -1.5: Elevated bearish positioning
- Z < -2.0: Extremely bearish positioning (potential contrarian buy signal)
TradeAnon calculates z-scores over a 52-week lookback period.
Position Change
Week-over-week change in net position.
Interpretation:
- Large increases: New money entering directional bets
- Large decreases: Position liquidation
- Trend in changes: Building or unwinding positions
COT Watchlist
The COT Watchlist surfaces symbols where positioning has reached statistical extremes and backtested signals have shown historical validity.
Signal Generation
A contrarian signal is generated when:
- Speculator positioning reaches extreme (z-score beyond threshold)
- Historical backtest shows positive expectancy (validated performance)
- Signal direction is contrarian (fade the crowd)
Threshold Levels
| Level | Z-Score | Historical Win Rate | Typical Signals/Year |
|---|---|---|---|
| Conservative | ±2.5σ | Higher | Fewer |
| Standard | ±2.0σ | Moderate | Moderate |
| Aggressive | ±1.5σ | Lower | More |
Performance Metrics
Each watchlist signal includes:
- Sharpe Ratio — Risk-adjusted return of the signal historically
- Win Rate — Percentage of signals that were profitable
- Average Return — Mean return following the signal
- Sample Size — Number of historical occurrences
How to Use This Feature
Weekly Monitoring
- Check the watchlist for new extreme readings after Friday's COT release
- Review z-scores across your markets of interest
- Compare commercial vs speculator positioning for divergences
- Track position changes for trend confirmation or exhaustion
Contrarian Trading
- Identify extreme speculator positioning (z-score beyond ±2.0)
- Verify commercial positioning is opposite (confirmation)
- Wait for price confirmation (don't fight the trend)
- Manage position according to your strategy
Trend Confirmation
COT data can confirm existing trends:
- Speculators building longs during uptrend: Trend has fuel
- Speculators reducing longs during uptrend: Watch for exhaustion
- Commercials hedging heavily into highs: Smart money cautious
Practical Examples
Example 1: Contrarian Buy Signal
Gold futures show:
- Speculator net position at -2.5 z-score (extremely bearish)
- Commercial net position at +2.0 z-score (extremely bullish)
- Price has been declining but approaching support
Interpretation: Speculators are crowded short while commercials are accumulating. Historical data suggests contrarian long opportunity.
Example 2: Trend Exhaustion Warning
S&P 500 futures show:
- Speculator net longs at +2.8 z-score (extremely bullish)
- Leveraged fund longs at record high
- Price at all-time highs
Interpretation: Crowded long positioning at price highs suggests limited upside fuel. Not necessarily a sell signal, but reduced position size may be prudent.
Example 3: Confirming a New Trend
Crude oil shows:
- Price breaks out of consolidation higher
- Speculator net longs increasing but not extreme (+1.0 z-score)
- Position changes show consistent weekly accumulation
Interpretation: Speculators are building positions but not crowded. Room for trend to continue as more participants join.
Markets Covered
TradeAnon covers COT data for:
Equity Index Futures:
- E-mini S&P 500 (ES)
- E-mini Nasdaq 100 (NQ)
- E-mini Russell 2000 (RTY)
- E-mini Dow (YM)
Energy:
- Crude Oil (CL)
- Natural Gas (NG)
- Gasoline (RB)
- Heating Oil (HO)
Metals:
- Gold (GC)
- Silver (SI)
- Copper (HG)
- Platinum (PL)
Currencies:
- Euro (6E)
- Japanese Yen (6J)
- British Pound (6B)
- Swiss Franc (6S)
- Australian Dollar (6A)
- Canadian Dollar (6C)
Interest Rates:
- 10-Year Treasury Note (ZN)
- 5-Year Treasury Note (ZF)
- 30-Year Treasury Bond (ZB)
- 2-Year Treasury Note (ZT)
Agricultural:
- Corn (ZC)
- Soybeans (ZS)
- Wheat (ZW)
- Cotton (CT)
- Sugar (SB)
Limitations
- Weekly data only — COT is released every Friday for positions as of Tuesday
- Lagging indicator — 3-day delay between position date and report
- Not a timing tool — Extremes can persist for weeks or months
- Category aggregation — Individual trader behavior not visible
- Position limits — Reporting thresholds may exclude some participants
Data Source
COT data is sourced from the Commodity Futures Trading Commission (CFTC), which publishes weekly Commitments of Traders reports every Friday at 3:30 PM Eastern.
Reports Used:
- Legacy COT Report (Futures Only)
- Traders in Financial Futures (TFF)
- Disaggregated Report (for commodities)
Related Concepts
Subscription Access
| Tier | Access Level |
|---|---|
| Free | — |
| Pro | Full access |
| Enterprise | Full access |