COT Weekly Interpretation Framework

Reading the Commitment of Traders report ad hoc produces inconsistent reads. A fixed framework turns the weekly release into a repeatable process with a score and a position size.

Step 1: Capture the Right Data

Download the CFTC's disaggregated futures-and-options report each Friday at 15:30 ET. Track three markets maximum per session to stay focused. Record for each: commercial net, non-commercial net, and non-reportable net, plus total open interest.

Step 2: Normalize to a Z-Score

Raw contract counts are meaningless. Convert each group's net position to a 3-year z-score:

z = (current net − 156-week mean) / 156-week std dev

A z-score above +2 or below −2 flags an extreme. The 156-week window (3 years) is long enough to capture regime context but short enough to reflect current market structure.

Step 3: Score the Setup

Assign a 0-3 score per market:

Condition	Points
Commercial z-score at extreme opposite to price trend	1
Non-commercial z at 3-year extreme in direction of trend	1
Open interest declining for 3+ weeks as price extends	1

A market scoring 3 is a high-conviction contrarian candidate. Score 2 is a watch. Below 2, ignore.

Step 4: Confirm with Price

Never act on COT alone. Require price confirmation:

• For a contrarian long: commercials max long, price holding a weekly support level, momentum turning up.
• For a contrarian short: commercials max short, price failing at weekly resistance.

Without price structure agreement, the report is context only.

Step 5: Size and Time the Trade

• Risk 0.5-1.0% of equity per COT-triggered trade. COT signals are slow; they can run early for weeks.
• Entry: scale in over 2-3 weeks using the next two weekly closes.
• Stop: beyond the weekly swing that confirmed the setup, typically 2-3 ATR.
• Time stop: exit if the setup has not resolved within 8 weeks. COT extremes that persist too long often reflect a regime shift, not a reversal.

Step 6: Journal the Outcome

Log the z-scores, score, entry, and exit. Review quarterly. Two failure patterns dominate: acting before price confirmation and holding past the 8-week time stop. The framework only works if you follow every step every week.