It is very important for you to know the market sentiment whether the market sentiment is bullish, bearish or plain neutral. Knowing the market sentiment can help you decide whether you want to trade in the direction of the market sentiment or against it. How do you gauge the market sentiment?
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Now COT Report contains all sorts of information about the cattle feeder contracts, the orange juice contracts, milk futures contracts before you can find the section on the currency futures. The currency futures market and the spot forex market are closely related. What is happening in the currency futures market is bound to happen in the spot forex market sooner rather than later. So, you should have a little patience while going through this highly valuable report that contains information that can sometime be measured in gold!
Commitment of Traders Report has got three sections;
1) Commercial: These are those market participants that use currency futures for hedging purposes.
2) Non-Commercial: These are those market participants who are in the market for pure speculation and include hedge funds, banks and so on!
3) Non-Reportable: These are the small players in the market like you and me, the retail traders.
COT Report will give you the long and short positions for each section. As a forex trader, we will only focus on the non-commercial section of the report. The reason is simple. These are the big players who are in the market for speculation while those listed in the commercial section of the report will most likely rollover their positions and want to take physical possession of the delivery which will be cash in this case. There will be some difference in quotation between the currency futures market and the spot forex market but you will soon get over it.
