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Spot EVERY Big Trend Change With This Essential Indicator!

By : Kelly Price
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You may not have heard of the Commitment of Traders Report, published by the CFTC - but this easy to understand indicator, can help you spot EVERY major trend changes in advance and trade for huge profits with low risk.

The commitment of traders report is available FREE, but very traders use it - yet it can predict important market tops and bottoms, with amazing accuracy and give you the biggest profits.

The Commitment of Traders Report

Insider trading is legal in currency futures markets, as long as the trading positions are reported to the CFTC and the report covers not just currencies but stocks, bonds and commodities as well.

The positions in currency futures mirror those in cash so it's applicable to cash forex positions. It's realized bi-weekly by the CFTC and is free to use.

The Commitments of Traders Report divides the positions held into three groups.

1. Commercials: They own the commodity they are dealing in and are using the futures market to hedge their position.

2. Large speculators: Are a group that hold large reportable positions. These traders are normally large fund managers or very high net worth individuals.

3. Small speculators: This group includes everyone else and they are normally speculators looking to make a profit.

The markets see price spikes all the time which push prices away from fair value and as you can see on any price chart these price spikes don't last long and prices return to fair value. This is crowd psychology at work and the emotions of greed, hope and fear push prices up or down to far as a result.

It's a trading fact that prices collapse when the fundamentals are most bullish and rally when they are most bearish as prices break from overbought or oversold levels.

The traders who can spot the price spikes of greed and fear and act on them have the chance to make big profits and this is why the net trader's positions of the Commitment of Traders Report are so important. A close look at the group's motives will explain why.

1. Commercials:

They are using their positions in the futures markets, to hedge their cash position. They trade without emotion, as they are hedging risk, and NOT speculating for profits.

These traders have a deep understanding of the fundamental supply and demand position and know when prices have been pushed to far from fair value.

When emotional price spikes occur they will "fade" the move - selling into emotionally generated buying and buying into emotionally generated selling.

As they are hedging, they will only change their positions when prices move significantly away from value and they represent the smart money and the traders you need to watch.

You then need to see if the other two groups both motivated by emotion are doing the opposite. If the commercials oppose the other two groups a price break in favor of the commercials is on the cards.

Large Speculators:

This category is dominated by funds that make their money trend following and selling greed to investors.

These large speculators tend to have a poor performance overall as a group, and normally get caught out at major turning points

Small speculators:

Small speculators are an emotional group of traders again with a poor track record and are always caught heavily long at important market tops and short at market bottoms.

Small moves in commercial positions are not important - commercials only move when big moves occur because their hedging and small moves are insignificant to them. When you see commercials buy and sell aggressively and speculators hold a heavily opposed position you have the set up for a price break in favor of the commercials.

It's a fact that:

1. The commercials are disciplined unemotional traders. 2. They know fair value of what they are trading in.

3. They are RIGHT about all major tops and bottoms and speculators are not.

By tracking the commercials are you tracking the professionals who know fair value and are the smart money and if you follow them you will see every major top or bottom forming.

Keep in mind:

They provide the set up - not the trigger to buy and sell and you should use your usual forex trading signals on your forex charts to time entry - but if you want a tool that will show major tops and bottoms forming in advance watch the commitment of traders report and you will add a valuable tool to help you achieve currency trading success.

About the author:
FREE! TRADER PDF'S - TRADE LIKE A PROGet newsletters, systems and some critical F REE FOREX Trading PDF's to give you the facts on how to become a professional trader and get more great forex info at: http://www.learncurrencytradingonline.com


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