COT Report Explained: Why Most Traders Read It Wrong

The CFTC publishes three different Commitment of Traders reports. Most traders only use the Legacy report — and that is a mistake. Learn which report to use for forex, commodities, and why the distinction matters.

Every Friday afternoon, the Commodity Futures Trading Commission (CFTC) publishes one of the most valuable datasets in financial markets: the Commitment of Traders (COT) report. It reveals how different categories of traders—from hedge funds to commercial hedgers—are positioned in futures markets. For forex and commodity traders, this is the closest thing you will get to seeing what institutional money is doing.

But here's the problem: most traders read the wrong report. The CFTC actually publishes three different COT reports, each designed for different asset classes. Using the wrong one can give you misleading data—or worse, the exact opposite signal of what's really happening.

In this guide, we'll break down exactly what the COT report is, explain the critical differences between the three CFTC reports, and show you which one to use depending on whether you trade currencies or commodities.

What Is the Commitment of Traders (COT) Report?

The COT report is a weekly publication by the U.S. Commodity Futures Trading Commission (CFTC), a federal agency that regulates futures and options markets. It aggregates the positions of all large traders who are required to report their holdings to the CFTC.

In practical terms, the report tells you: how many contracts are hedge funds holding long or short in EUR futures? Are commodity producers increasing their hedges in gold? Is speculative money flowing into or out of crude oil?

The Three CFTC Reports (This Is Where Most Traders Go Wrong)

When traders say "the COT report," they usually mean the Legacy report—the oldest and most commonly referenced version. But the CFTC actually publishes three distinct reports, each breaking down market participants differently:

Let's look at why each report exists—and why using the Legacy report for everything is a mistake.

1. The Legacy COT Report (The "Simple" Version)

This is the original COT report and what most retail traders reference when they search for "COT data." It divides market participants into just two meaningful buckets:

• Commercials — entities that use futures to hedge their core business risk
• Non-Commercials (Large Speculators) — typically hedge funds and managed money
• Non-Reportable — small traders below the reporting threshold

2. Traders in Financial Futures (TFF) — The Right Choice for Forex

The TFF report was introduced specifically because financial futures (currencies, interest rates, equity indices) needed a more nuanced breakdown than the Legacy report could provide. It separates traders into four categories:

• Dealer/Intermediary — sell-side banks and dealers. They facilitate client trades and typically take the other side of speculative flows.
• Asset Manager/Institutional — pension funds, insurance companies, endowments. Large, slow-moving money with a long-term horizon.
• Leveraged Funds — hedge funds, CTAs, and proprietary trading firms. These are the speculators you want to track.
• Other Reportable — everyone else above the reporting threshold that doesn't fit the above.

This is why serious forex analysis uses the TFF report, not Legacy. Major currencies covered include EUR, GBP, JPY, AUD, CAD, CHF, and the DXY (Dollar Index).

3. The Disaggregated Report — The Right Choice for Commodities

For physical commodity futures—gold, silver, crude oil, copper, platinum—the Disaggregated report provides the clearest picture. It breaks traders into:

• Producer/Merchant/Processor/User — entities that produce or consume the physical commodity. A gold miner hedging future production, or an airline hedging jet fuel costs.
• Swap Dealers — banks and dealers facilitating swaps. In the Legacy report, these get lumped with producers—creating a misleading "Commercial" number.
• Managed Money — hedge funds, CTAs, and commodity pool operators. The speculative capital you want to track.
• Other Reportable — other large traders.

Side-by-Side: Legacy vs. The Right Report

To make the distinction crystal clear, let's look at how the same market data appears in the Legacy report vs. the more specialized reports:

The same issue applies to forex. The Legacy "Non-Commercial" category for EUR futures mixes hedge fund positions with pension fund rebalancing. The TFF report separates them clearly, so you know whether the positioning is speculative (momentum-driven, likely to reverse) or structural (long-term allocation, unlikely to reverse quickly).

How to Actually Read COT Data

Now that you know which report to use, here are the key metrics to track:

1. Net Positioning

The most basic metric: Long contracts minus Short contracts. If hedge funds are net long 85,000 EUR contracts, they are betting on Euro strength. Net short means they are betting on Euro weakness.

2. Weekly Changes

More important than the absolute number is the change. If hedge funds were net long 85,000 last week and now they are net long 72,000, that's a significant reduction — they are unwinding longs. This can be a leading indicator of a trend change.

3. Extreme Positioning (Z-Scores & Percentiles)

Raw contract numbers are hard to interpret in isolation. Is 85,000 contracts a lot? That depends on historical context. That's why professionals use statistical measures:

• Z-Score — measures how many standard deviations the current positioning is from the historical mean. A z-score above +2 or below −2 signals extreme positioning.
• Percentile — shows where current positioning ranks relative to the past 1-3 years. Above the 90th percentile or below the 10th percentile often precedes reversals.

4. The "FLIP" — Net Position Reversal

One of the most significant events in COT analysis is a "flip" — when hedge funds go from net long to net short (or vice versa). This signals a genuine change in institutional conviction, not just trimming. A flip in Leveraged Money positioning on EUR futures, for example, often coincides with multi-week trend changes.

Summary: Which Report for Which Market?

How Forex Fundamentals Uses COT Data

At Forex Fundamentals, we don't use the Legacy COT report. We pull data directly from the CFTC and use the correct report for each asset class:

• For currencies (EUR, GBP, JPY, AUD, CAD, CHF, DXY) — we use the Traders in Financial Futures report, tracking Leveraged Money positioning
• For commodities (Gold, Silver, Copper, Oil, Platinum, Palladium) — we use the Disaggregated report, tracking Managed Money positioning

On top of the raw positioning data, our platform automatically calculates:

• Z-Scores — statistical extremes relative to historical data
• Percentile rankings — where current positioning sits in the 1-year and 3-year distribution
• FLIP detection — instant alerts when hedge funds reverse their net position
• Weekly change tracking — see how positioning is shifting in real-time

This is all updated automatically every Friday when the CFTC publishes new data, and presented in a visual, easy-to-read format — no spreadsheets required.

Common Mistakes When Using COT Data

Mistake 1: Using Only the Legacy Report

As we've covered, the Legacy report's "Commercial" and "Non-Commercial" categories are outdated. Swap dealers get classified as commercials, inflating the hedger category. For any serious analysis, use TFF (forex) or Disaggregated (commodities).

Mistake 2: Trading COT Data as a Standalone Signal

COT data is a confirmation tool, not an entry signal by itself. Extreme positioning tells you a trend may be exhausted, but it doesn't tell you when the reversal will happen. Always combine COT analysis with your fundamental bias and technical timing.

Mistake 3: Ignoring the "Lag"

COT data is reported as of Tuesday but released on Friday — a 3-day lag. In a fast-moving market, the positioning picture could have already changed by the time you see it. This is why COT is best used for medium-term (swing and position trading) analysis rather than day trading.

The Bottom Line

The COT report is one of the most powerful publicly available datasets for understanding what "smart money" is doing. But to use it correctly, you need to understand that not all COT reports are created equal:

• The Legacy report is widely referenced but fundamentally flawed for modern markets
• The TFF report gives you a clean read on hedge fund forex positioning via Leveraged Money
• The Disaggregated report gives you a clean read on hedge fund commodity positioning via Managed Money

By using the right report for the right market—and combining it with robust fundamental analysis and technical execution—you can gain an institutional edge that most retail traders don't even know exists.