COT Data: How Smart Money Positions Predict Major reversalHey whats up traders let's check on COT data. There is many ways how to use it and I dont use it same way as Larry Williams. Here is what works for me when following positions of the hig players that has to report their position's to the SEC.
This is important:
1️⃣ COT data isn’t a magic crystal ball—but it’s a powerful tool if you know how to combine it with technical analysis. You need to use your mechanical system. Not for Intraday Trading.
2️⃣ Remember they know we are watching this data and what we see is what they want us to see, so they are often trying to hide their positions as long as possible. Thats why intra-week reversal are happening on Wednesday after they report their positions in a Tuesday. And are published on Friday.
3️⃣ They cannot hide the data forever, follow the data week by week to keep in track whats happening. It will increase your winning ratio.
4️⃣ Every 3 months there is a new futures contract. The must close the positions and reopen them in to the new contract, They are using it for reversals.
5️⃣ If there is some US holidays on the day when report should be released to the public its delayed to the next week. And thats when they do biggest positions changes secretly.
‼️Think outside the box. Even when you see bearish COT - dont be stupid to sell low. It's not not order flow for intraday scalping, you have time. But if you something is clearly bearish every run above weekly and daily highs is high probability Sell in the smart money trend.
My goal is to understand if the last price swing move. How the orders has been there, basically trying to understand to what candles cannot tell me. Lets look to few examples.
🧪 EURUSD - we can see that on that lows, we had 190k longs, which has been around 59k net positions, which is the difference between the longs and shorts. Then as the price has been moving higher, we can see that the longs has been steadily growing up to the 250k average longs, but the shorts has been still around 130-120 range. So what we can see in this move is that the longs are growing, while shorts has been unchanged, which is resulting in the net positions growth from the 51k to the 115. So this move is supported as a bullish trend. 🧪 USDJPY - here is a little bit tricky because those who are just reading a COT data and just comparing long and shorts with just last past few weeks, which you can find on the SEC data, and you don't have a complete report, you will be misreading it. Because you can see that even though that since May, price has been going up in that circled swing, but if we look to the shorts, we can see that basically shorts has been decreasing while the longs has been increasing, right? And the result is in the net positions that we dropped from the negative minus 177K to the minus 82K. So even though that the net positions are still negative, they are actually coming from the very, very negative to the less negative, which is actually bullish. So therefore, we has to be watching a bigger picture like this. 🧪 XAUUSD - Now let's focus on this highlighted swing on the gold, where we can see that we had quite extreme longs during the January. There was a 356k longs. Then price has been swinging up in this red-circled highlighted swing. And watch what was happening with the positions. The longs basically has been decreasing. You can see that we dropped from the 356k to the 300k and all the way down to the 240k. So what that means? It means that the price is going up and the smart money, non-commercials, are taking profits, which is actually causing the big changes. You can see in the last column, the orange changes, and which actually is also a huge decrease in the net positions. So we can see the net positions have been around the 300k, and then it dropped to the 160k, right? And we can see the shorts didn't grow too much, but there was a difference between the longs exposure. So there was a profit-taking, hence we can expect a pullback, which has happened. 🧪 USDCAD - Here we have an example of the USDCAD and we can see on that swing price is dropping down, right? And we can see the shorts are basically around 16K, 20K, 19K, basically decreasing, right? Shorts are decreasing, but the longs have been added. So basically the price is dropping down to the weekly order block and we could be expecting bounce because as the price is dropping down, we can see how the longs have grew from the 80K to 127, 115, right? So the longs are growing while the price is going down. Net positions increasing, okay? So that we can expect a bullish reversal. And as we can see on this next picture, on that weekly order block, the bullish reversal has happened and price has completely reversed. 🧪 Dollar - let's focus on the column of the longs, where we can see that the longs are slightly growing, but what has been happening in this pullback, which has been happening into this weekly level, you can see how the shorts basically are decreasing. So shorts have decreased from 22K to the 13K, while the longs start to grow. And you can see the flip in the net positions from the minus 5K to plus 5K, right, which is signaling a bullish dollar. Therefore, I'm expecting a bullish move up, because it's all aligning with the price action. 🧪 EURUSD - let's focus on the column longs. We can see how the longs has decreased from 300k to the 214 and the shorts has increased from 138k to the 200, 188k, right? So we can see the net positions has been 180k in the February and now they are just 26k. And it has happened when the price has reached the monthly serious range and it's reversing. So therefore I'm expecting a price continue lower. 🚀Boost | 🔁 Share | 💬 Comment | ✅Follow for more Education
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