ICT Market Maker Primer Course - 21 - COT Insights For Effective Price Action Analysis.srt
Last modified by Drunk Monkey on 2021-06-10 06:19
| 1 | 00:00:12,330 --> 00:00:19,230 | ICT: Hey folks, welcome back. This teaching is going to be on the Commitment of Traders report insights for effective price action analysis. |
| 2 | 00:00:24,660 --> 00:00:38,700 | Okay Commitment of Traders report in graph format points of focus for this module, how to locate co t data loading Commitment of Traders graph. insights |
| 3 | 00:00:38,700 --> 00:00:54,570 | from the commercials how commercial hedgers can aid in your analysis. Okay, folks, we are on bar chart.com case is a website I use to illustrate Commitment |
| 4 | 00:00:54,570 --> 00:01:12,000 | of Traders reports in graph form. And we just click on this little toggle box up here to go to a commodity. And we're gonna look at the Canadian dollar. And |
| 5 | 00:01:12,000 --> 00:01:27,210 | right now, the largest open interest is on the March contract of 2018. So we'll click on that. And then we'll click on technical chart. Now we're going to scrub |
| 6 | 00:01:27,210 --> 00:01:39,960 | down into this area here. So we're gonna go to candlestick print, turn the volume off. I don't want to see this little boxes very distracting to me |
| 7 | 00:01:39,960 --> 00:01:51,540 | personally, but click on weekly contract, going to go to three years is about a good enough timeframe to see. And then we're going to go to Commitment of |
| 8 | 00:01:51,540 --> 00:02:00,750 | Traders. Now there's several here, there's Commitment of Traders, just aggregated, then we have Commitment of Traders, financial traders report and |
| 9 | 00:02:00,750 --> 00:02:14,370 | Commitment of Traders, we just want this one. Okay. Click on that. And we want to maximize that to large. And we're going to click on draw. chart, it'll pop up |
| 10 | 00:02:14,370 --> 00:02:35,580 | here. Again, let's take her volume off. redraw that. So that we we have our chart with the Commitment of Traders report plotted. Now you'll notice that |
| 11 | 00:02:35,580 --> 00:02:44,400 | there is a red line, which is commercial speculators. There's a dark blue line, which is small speculators. And there's a green line. It's large speculators. |
| 12 | 00:02:44,400 --> 00:02:54,510 | Now large speculators are like large funds, large private traders, small specks are like anyone else in the retail world. And generally they're wrong about |
| 13 | 00:02:54,540 --> 00:03:03,120 | everything they're doing. In the commercial speculators are many times diametrically opposed to this group over here at Dillard specs. So what we want |
| 14 | 00:03:03,120 --> 00:03:15,150 | to be looking at is this red group, because when they get a very large position, now, notice there's a zero line right here. Okay, draw that out across the |
| 15 | 00:03:15,150 --> 00:03:25,920 | entire graph, and I'll put that on the chart. So you can see it by having that anything above the line would be deemed bullish. And anything below it or at it |
| 16 | 00:03:26,130 --> 00:03:38,160 | would be neutral to bearish. All this in here, you can see the big run up in their positions, this is their buying. Okay, so commercials are large. hedgers, |
| 17 | 00:03:38,340 --> 00:03:48,180 | the people that really know what's going on banks, institutions, insurance companies, large speculators are traders. Okay, they're, they're large fund |
| 18 | 00:03:48,180 --> 00:03:58,560 | managers or private traders. So when we see these big build ups, this would be a net long position, very large net long position. And you can see, eventually, |
| 19 | 00:03:58,620 --> 00:04:06,330 | price does in fact, have a large rally up. Now during all this consolidation here, you can see even though the commercials were below the zero line, which |
| 20 | 00:04:06,330 --> 00:04:15,360 | would be net short, they went back above 09. And you can see now they have a little bit of a move higher, and they dip back below the zero line, they started |
| 21 | 00:04:15,360 --> 00:04:24,330 | selling off. And watch what happens when these equal lows have been taken out right here. Huge build up of net long positions and look at the reaction in |
| 22 | 00:04:24,330 --> 00:04:34,380 | price on the Canadian dollar as a result, you extrapolate a move on the upside what's in reach for a run above this old high back here. Okay, so now we're in |
| 23 | 00:04:34,380 --> 00:04:45,090 | an area where we're heavily net short by the commercials. And you've seen their nice big drop down in the Canadian dollar as a result, which is a bullish move |
| 24 | 00:04:45,090 --> 00:04:54,210 | for foreign exchange or Forex. The pair is the dollar CAD. So if this is the futures contract is what we're looking at. If this is bearish, it's going to be |
| 25 | 00:04:54,210 --> 00:05:02,070 | bullish for the dollar CAD pair. If this currency in the futures market is bullish, it's going to be bearish in the dollar CAD pair. |
| 26 | 00:05:03,659 --> 00:05:17,399 | So what I like to look for is a significant net long position to justify my long entry and or a heavy net short position to justify my short position. So if we |
| 27 | 00:05:17,399 --> 00:05:25,199 | go back and look at historical data, we can see that there's major key turning points, that the commercials or the red line indicate a very strong willingness |
| 28 | 00:05:25,199 --> 00:05:35,069 | to be a buyer, or seller. And by using this information, we can glean insight, and also build confidence behind our trades, because we know that we have smart |
| 29 | 00:05:35,069 --> 00:05:55,109 | money entities behind us. Which one more example. And you probably have seen enough. Right, so we're going to use euro. just changing that first letter to an |
| 30 | 00:05:55,139 --> 00:06:09,449 | E gives us the Euro, on a weekly, nothing else needs to be changed down here. So we have again, the euro and consolidation, every time, there's a big build up, |
| 31 | 00:06:09,509 --> 00:06:20,639 | there was a small little rally in here, the big build up in their commercial commercial holdings, rallies. And as price starts to drop below these equal |
| 32 | 00:06:20,639 --> 00:06:30,839 | lows, look closely. Okay, now equal lows here, price dips down below that on a weekly capacity. And we are in a net long position. So the commercials are |
| 33 | 00:06:30,899 --> 00:06:40,679 | accumulating dispositions long. And notice what happens when you get above these equal highs here and this high, we have this high draw that out in time. That's |
| 34 | 00:06:40,679 --> 00:06:55,109 | the 120. Big figure their net short at that time. Okay, so we have seen liquidation from 120, down to 117. Now, we're consolidating again. So the |
| 35 | 00:06:55,109 --> 00:07:10,109 | benefit of having this tool is to wellgate the maximum saturation in terms of buyers and sellers. Because if you haven't noticed already, the red line, they |
| 36 | 00:07:10,109 --> 00:07:19,889 | will put the top and the bottom in the marketplace, when everything gets to an extreme, whether it be net long or net short, they usually make the higher low |
| 37 | 00:07:19,889 --> 00:07:32,339 | the entire move, because their pockets are way deeper than ours ever will be. And they are the market. Notice also that just because they swung below the zero |
| 38 | 00:07:32,339 --> 00:07:42,809 | line like it did here, that is in no way indicative of a directional change, or words, if they're bullish up here, and they swing down below the zero line, that |
| 39 | 00:07:42,809 --> 00:07:51,389 | does not mean that they're going to expect this thing to start going lower. All this means is they started doing a transition from a heavy long position to now |
| 40 | 00:07:51,839 --> 00:08:01,229 | that of a heavy nor net short position. Okay, so they were selling in this rally. The problem is, when I learned this concept from Larry Williams, I felt |
| 41 | 00:08:01,229 --> 00:08:09,179 | that this was going to be the top as soon as this happened, this will be the top and it should drop down. I did not understand institution orderflow where the |
| 42 | 00:08:09,179 --> 00:08:19,319 | orders need to be tagged first. So there has to be some measure of liquidity ran out which we see here, then a net short position by the commercials would be |
| 43 | 00:08:19,529 --> 00:08:30,869 | significant or noteworthy. So again, this is just an introductory lesson to get you acclimated to the Commitment of Traders report if you want to learn more |
| 44 | 00:08:30,869 --> 00:08:45,419 | about this subject matter. These two books here are, in my opinion, the two best individual books on the topic. You can see it there rather inexpensive. And it's |
| 45 | 00:08:45,419 --> 00:08:53,759 | also a book by Larry Williams, how I made a million dollars trading commodities last year, where he basically introduced it to the trading community. And it |
| 46 | 00:08:53,969 --> 00:09:03,929 | took off like a wildfire. Problem is folks just simply looked at the net short or net long position. And Larry himself even mentioned sometimes got him in |
| 47 | 00:09:03,929 --> 00:09:14,729 | trouble. But there are enormous benefits to understanding this information. When you have also understanding of institutional order flow and how to read price |
| 48 | 00:09:14,729 --> 00:09:23,219 | action. When you blend these two things together, you get really amazing results. And it's not limited just to currencies. It's in stock indices and it's |
| 49 | 00:09:23,219 --> 00:09:35,579 | in bonds, and it's in commodity futures. Hope you enjoyed this presentation. If you'd like to find more can visit my website at the inner circle trader.com |