TASC 2023.10 COT Commercials Indicator

2023年9月13日

█ OVERVIEW

This script implements the COT Commercials Indicator introduced by Alfred François Tagher in an article featured in TASC's October 2023 edition of Traders' Tips. The indicator is designed for use in futures markets and represents a fast stochastic (%K) calculated based on the commercial open interest values of an asset derived from the weekly Commitments Of Traders (COT) report.

█ CONCEPTS

The COT report, issued by the Commodity ​Futures Trading Commission (CFTC), presents a breakdown of reportable open interest positions held by various trader groups—commercial, noncommercial, and nonreportable (small traders). Open interest reflects the total number of derivative contracts entered by market participants but not yet settled. Consequently, it can serve as a measure of market activity and liquidity.

The indicator showcased here aims to analyze changes in the reported net values of open interest for commercial traders/hedgers (often referred to as 'smart money', as they deal directly in underlying commodities). The net values are positive when the commercial traders have more long positions than short ones and negative when they hold more short positions than long ones. Positive net values indicate that commercial traders hold more long positions than short ones, while negative values indicate the opposite. Thus, overbought and oversold conditions of the COT Commercials Indicator potentially suggest collective bullish and bearish sentiments, respectively.

█ CALCULATIONS

The calculations involve these steps:
1. Net open interest values are extracted from COT data using the LibraryCOT library provided by TradingView.
2. A fast stochastic indicator (%K) is then applied to normalize these net values.
The script also provides an option of calculating and plotting the indicator curve for noncommercial (speculators) open interest.