Now it’s important to note that the COT data is based on the activity within the US futures market. Nevertheless this data can be extremely valuable to spot Forex traders as well since there is a high level of correlation between both types of markets. So now that we understand what the COT report is, what significance does it hold and how can it help in anticipating future price movements of a currency pair? Well, if we knew how the smartest traders are positioning themselves in the market, and whether that represents any major deviation from their historical norms, wouldn’t that be valuable information that we can use in our own trading? The commercials are considered the “Smart money” and they are typically on the right side of the market at major turning points. The large speculator class of traders are mostly trend followers, and as such, will be on the right side the market during a trend. Lastly, the non-reportables are the small speculators, which are considered the “dumb money” and are usually wrong most of the time. As such, a thorough COT analysis can help us to understand the positioning of major groups of market participants at different stages of the market cycle. Below is an example of the COT chart for the Euro futures contract. The red line represents the net positions of commercials, the green line represents the net positions of large speculators, and the lower blue line represents the net positions of small speculators.