Just for information Demi has been posting every week the updated COT data that is used in some indicators he posted a couple of years ago, also at the old TSD forum we had some mt4 versions where I think that data would be useful, sorry for my delay in bringing this up your thread kinda brought some of those memories back. Seem to remember something about needing something like the data Demi is providing for those mt4 indicators too, so will see what I or actually anyone can dig up. This thread is where Demi post the updated COT data file every week. COTOgee wrote: Sat Oct 01, 2022 5:15 pm Why COT (large speculator sentiment) data matters and why it's not the same as contrarian retail sentiment data.
Correlation does not automatically equal causation.
The opposite of retail sentiment does not equal large speculator (Specs) sentiment.
The 2 have completely different drivers.
Retail sentiment as a contrarian indicator was developed by DailyFX over 15 years ago. They had access to the broker FXCM retail trader data and noted that when US indices were in a strong uptrend retail were often net short and vice versa in a downtrend.
What was happening was that retail were looking at the charts and saw that major turning points were obvious so they were trying to predict them, and were getting stopped out, over and over again until their account was blown. But not to worry there was a steady stream of newbs to take their place.
This never used to happen so much before 2000 and the advent of computer online trading. What happened then was that you would phone your broker and tell him you wanted to short a market that was in a strong uptrend and they would fall off their chair laughing at you and so you changed your mind and didn't try that again.
But computer online trading took that link out of the chain and now there is nothing to stop newbs trying to predict major reversals and so that remains the main reason why the majority of retail traders lose.
Specs do not just do the opposite of retail traders, they don't care and have no interest in what retail traders are doing. Retail traders do not move markets, the only time a chart might register retail activity is when they're all piling in on a FOMO (Fear Of Missing Out) move.
Specs move markets. Specs trade for banks, asset management firms, pension and hedge funds. The have a lot of money, a lot of resources, analysts, and expensive custom indicators.
They are 'always in' because they need to put the money somewhere (even if that's just in cash USD in times of turmoil). But usually they are trying to follow asset waves within market waves. For every market going up there's a market going down.
Specs can't just jump in and out, that would shock the market and unbalance price, so they spend weeks and sometimes months building up a position and same for unwinding positions.
Retail sentiment will not show that but COT data does.
COT data will track Specs going net long, increasing their longs, tapering their longs and finally exiting their longs.
The 2 are correlated but Specs lead, charts lag.
That's what I was trying to point out in the original post.
Look at Specs positioning on Friday evening for a clue as to what they expect the charts to do over the next week, I thought made that point quite well.
If you are tracking just 1 market you can just follow the plus or minus of the net positioning week by week but for more markets it's better to see week by week on a graph.
COT Base are the oldest and best for COT charts. About 3 or 4 years ago they made you sign up to see their charts but it's free and they don't hassle you at all.
Another good one is Tradingster dot com.
For retail sentiment data DailyFX dot com is the oldest and the best simply because they currently use data from the largest retail broker in the world (IG).
ps) on the mt5 site if you do a search for COT the second thing that came up for me is a very good article by "Vasily Sokolo" and some stuff to download from there will be going through it and see what we can come up with.
