Complimentary Analysis.........

[Buk 10]

something which might assist you in preparing for potential (larger) swing opportunities torero (& others), are the C.O.T reports………

 

we use them as a complimentary price aid assistor when spotting extended or overbought/oversold levels………for the majors, I observe 2 charts…..the $ index & the specific pair I’m interested in, as prices shift to, & begin stalling around key levels (round numbers/prev highs-lows or lower top/higher bottom extensions)……

 

there are 3 colored lines on these charts & for those not familiar with this information: the blue line represents the large commercials – I’m not particularly concerned with their positioning, as much of their activity in the currency environment revolves primarily around hedging…..they’re always at opposite extremes to the larger non-commercial & retail community…..

 

the red line highlights the smaller retail community, who are generally always out of kilter & sat to the wrong side of the larger based swing moves, due in part to their historically under capitalized account holdings and/or their preference for trading smaller (intraday) positions………

 

the line of interest which I pay close att’n to is the green line…..this sector of the currency market consists of mid to large CTA’s, mid sized hedge funds & well capitalized firms………

 

essentially, the main points of focus are similar to the common themes when studying the individual FX pairs technical landscape…..I’m seeking bar formations, over-extension, topping/bottoming, higher lows/lower highs etc……

 

the $ index is representative of the major trading nations within the FX community, therefore to guage a sentiment indication, I want to see that the index is playing ball with it's respective partners......

 

I can then drill into either the Euro (which is it’s major liquidity contributor), the Swiss Franc or Cable (my favored candidates from the majors) to spot potential set-ups via our swing strat……….

 

It’s then merely a case of waiting for our normal triggers around value area’s which marry up with the associated risk, to execute…………

 

used in harmony with the generic fundamentals, they can help quantify possible positioning & assist with planning an effective entry & sensible risk zone………..

 

I’ll use a recent example of this structure in relation to the Swiss……at both long & short zones of interest from last quarter………….

 

leading into 4th quarter we can see the $ indx was nudging a key double top zone & the larger non-comms were positioned strongly to the short side of francs on the franc COT chart (2nd example)……

 

 

 

 

If we look at the specific daily chart on the franc around early Oct, we see price was beginning to print neutral clusters around the key 1.27 round number (better evidenced via the 240/60m frames at that period)……price also printed a 1-2-3 reversal closing with a spinning top neutral print…….

 

 

 

again, as the franc began displaying signs of exhaustion during early Dec (both on the COT & it’s specific daily charts), at it’s yearly resistance level, the $ indx broke a run of negative bar prints & started to even out………..

 

 

the franc COT chart also printed a pin-bar at it’s highs – a very powerful reversal signal…….looking at the daily chart, confirmed the hesitancy & collection of strong neutral-reversal bars again at a key Round Number (1.19)

 

by drilling down to your 4hr-1hr combo’s you could witness similar behaviour…….

[pipMonster 10]

Buk,

 

Do you follow the $index vs COT on a daily chart?

 

Is that a proprietary plug-in for TradeStation plotting the three different levels of COT?

 

How often is the COT data released?

 

Thanks,

Jack

[Buk 10]

Jack.......

 

yeah, we keep tabs on the $ indx most day's & like to see what's happening with regards the C.O.T in relation to open interest & long/short bias........

 

it/they're only a guide (like any other form of analysis), given the C.O.T data is derived from the futures contracts....but it offers a heads up to extreme positioning on & around key levels coming into focus.........

 

no, the examples aren't a Tradestation exclusive, the guys observe them via the CME site..........

 

try this link.............

 

Free COT Charts

 

I look at both the weekly & daily info, including the detailed report for the specific number breakdown to keep an eye on the % differences.........

 

example below..........

 

the data is compiled each Tuesday & printed on a Friday...............

 

 

 

[torero 10]

Thanks, Buk, for sharing. Very nice insight into understanding what the other types of traders are doing. So do you check the chart first for reactions to key S/R levels then check COT for confirmation or is it the other other way around?

[pipMonster 10]

Thanks Buk!

 

This info is greatly appreciated and will be added to the tool box.

 

-Jack

[Buk 10]

Thanks, Buk, for sharing. Very nice insight into understanding what the other types of traders are doing. So do you check the chart first for reactions to key S/R levels then check COT for confirmation or is it the other other way around?

 

to be honest torero, once you get into the habit of looking at info (whatever it might be), you begin to instinctively plan/prepare for certain events unfolding as price threatens a key level?........

 

the data (C.O.T or whatever), merely confirms whats panning out......

 

it's the price bars & formations they display on the main working templates which over-ride everything, in my view.....but as an example, in a strong upkick, as price approaches a big Round Number for instance, we'll have a damned good idea that the smart money will be looking to cover (pare off % stakes) sit back & wait for the reaction............the dumb money will try either continuation attempts (getting tangled up in the pullback) and/or plough in & attempt to sell it hard, again getting caught in traps assuming a 'hard sell-off' is nigh..........

 

the C.O.T will offer clues as to how much paring off (open interest etc) is being done, & the $ indx will confirm whether the price bias is "across the board" or instrument specific............

 

nothing is nailed on or guaranteed, but these differing observation tools sometimes help to decide whether to pare off/exit or sit tight & wait......

 

I don't look at them in any particular order, simply as a collective information guage.............

[torero 10]

If you don't mind sharing, can you give us some insight on any correlations between pairs? I am looking at other pairs to observe and possibly trade down the road and looking to trading pairs that have no correlation whatsoever to diversify risks. Your experience and observation would be greatly appreciated. Here's what I'm watching: EURCHF, USDCHF, EURJPY, USDJPY, USDCAD, EURGBP, among my favoriate already Cable. I'm staying out of EURUSD. Somehow, I don't like EURUSD, maybe because too many are trading it, just my personal bias I guess. Thanks.

[Buk 10]

best place to start when considering the type of strategy you wish to implement torero is to map a corellation graph of the respective instruments you're interested in?........

 

here's a link to the rolling data which updates the 5, 20 & 100 hour stats to the respective pairings.........

 

you can then keep a check on the specific pairings & how they interact....thus refining the base structure of what you're looking to achieve........

 

Intraday currencies correlation - Mataf.net

[torero 10]

Fantastic site. Thanks very much Buk.

 

I haven't been away most of the morning so looks like things picked off they it was left on Friday. I won't do much today as things seem prices are nearing their targets already.