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why are large speculators a mirror image of commercials?
When you look at historical COT data it's not even a vague correlation, but almost an exact mirror image where if large speculators long, then commercials will short. I wonder if this is the case even on an hourly basis where the net number of large speculator shorts opened equals the net number of commercial longs opened for the hour.
Can you help answer these questions from other members on NexusFi?
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It's a zero sum game. For every future bought one is sold. If spec buys from spec, net COT change is zero. If spec buys from commercial net COT change is +1/-1.
In my opinion it matters not. watch the small traders and look to do the opposite. Currency traders have many more markets in which they actively trade, FOREX for one. It's very difficult to make a decision based on the C.O.T. report. Same is true of stock indices.
In my opinion you shouldn't focus solely on COT report or make your daily trading decisions based on that. It's more about extremes (let's say historically specs are super short and commercials are long) which might indicate the reversal of the trend. SMCJB put it right.
Generally, the traders taking the other side of the commercials' trades are the specs. This is because commercials are looking to hedge their real-world inventory (for example, their oil in the depository) and they want to offload their market risk to someone who is willing to take it, which, really by definition, is a spec, who is generally looking for unhedged positions so he can make some money from assuming the risk.
Commercials and specs will always be mirror images. It's what the futures market is all about: commercials offloading market risk and specs taking it on.
