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12,774 Pips Using The COT ChartsI promised in the forums to provide some clarification on the COT reports today. Well, I was only able to finish part of the information package I'm creating for everyone so I don't have all of the information today. However, I do have a few interesting tid bits to whet your whistle. Check this out. I have talked about using the orange sentiment line on the COT chart as a trading signal generator. When it crosses above the signal line, you can buy the currency pair, and when it crosses below the signal line, you can sell the currency pair. I finished the backtesting on that stategy through 2003 (with the exception of the NZD/USD which only goes through 2006 due to the CFTC not tracking it regularly before then). Here are the results: - EUR/USD: 3,963 pips - GBP/USD: 1,708 pips - USD/CHF: 1,112 pips - USD/JPY: 297 pips - USD/CAD: 3,530 pips - AUD/USD: 627 pips - NZD/USD: 1,537 pips - TOTAL: 12,774 pips Those returns aren't bad, eh? I will detail the exact dates and prices of each of the trades in the full information package that I should have done shortly. Of course, there were some nice winners and some nice losers in the backtesting, but overall it works quite well. I still think using the indicator as a sentiment indicator is still the best way to use it, but it is nice to see it has some technical uses as well. For those of you who have been wondering how the orange sentiment line is calculated, it is similar to how you would calculate a MACD histogram. One last thing, the GBP/JPY COT Sentiment Indicator gave a signal today. Click here to check it out. |
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