In the last article we showed you how foreign exchange participants do not place trades on a centralized market. Instead, each individual person and entity is essentially a little piece of a larger market.
Well, now we’re going to explain the different firms that make up the currency market, and how you can get a bird’s eye view of how traders are moving their money around. Seeing how these traders engage in the foreign exchange market is as easy as watching the Commitment of Traders report.
Commercial – The traders in the commercial breakdown are the businesses (large, multi-national corporations) which use currency futures to hedge out their earnings in currencies different from their home country. By buying and selling futures, commercial traders can insulate their businesses from changes in the currency markets.
Non-Commercial Speculators – Non-commercial interest is made up of large individual investors and traders, banks, hedge funds, and other financial institutions. These traders are looking not to buy and sell to hedge out their foreign business profits, but to make a profit by correctly predicting the changes in the foreign exchange market. They’re in it for the money—these are the traders to watch!
Non-reportables – Non-reportable interest is made up of small investors who do not trade in large enough quantities to have to report their positions to the futures regulator, the Commodity Futures Trading Commission. This segment of the report is dedicated to smaller, retail investors, who make up only a small portion of total volume on the foreign exchange market.
The COT is also important because it solidifies the earlier portions of this guide—it shows the three major divisions in the foreign exchange market, and also how these players interface with currency trading.
In knowing that this report exists, you are empowered with the ability to see how major market investors and traders are influencing the current prices.
Well, now we’re going to explain the different firms that make up the currency market, and how you can get a bird’s eye view of how traders are moving their money around. Seeing how these traders engage in the foreign exchange market is as easy as watching the Commitment of Traders report.
Firms in Forex
Traders in the COT report are broken into three major classifications:Commercial – The traders in the commercial breakdown are the businesses (large, multi-national corporations) which use currency futures to hedge out their earnings in currencies different from their home country. By buying and selling futures, commercial traders can insulate their businesses from changes in the currency markets.
Non-Commercial Speculators – Non-commercial interest is made up of large individual investors and traders, banks, hedge funds, and other financial institutions. These traders are looking not to buy and sell to hedge out their foreign business profits, but to make a profit by correctly predicting the changes in the foreign exchange market. They’re in it for the money—these are the traders to watch!
Non-reportables – Non-reportable interest is made up of small investors who do not trade in large enough quantities to have to report their positions to the futures regulator, the Commodity Futures Trading Commission. This segment of the report is dedicated to smaller, retail investors, who make up only a small portion of total volume on the foreign exchange market.
Major Forex Players
Knowing how the major market players are placing their positions is a great way to see the foreign exchange market from a eagle’s eye view. Almost all traders and speculators should evaluate the Commitment of Traders report because it is, in essence, the best way to see how the major movers are playing foreign exchange.The COT is also important because it solidifies the earlier portions of this guide—it shows the three major divisions in the foreign exchange market, and also how these players interface with currency trading.
In knowing that this report exists, you are empowered with the ability to see how major market investors and traders are influencing the current prices.
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