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OPEN INTEREST OF COMMERCIAL TRADERS USED TO FORECAST TRENDS  AND TURNING POINTS IN  SECURITIES OF THE  FINANCIAL MARKETS

 

By Antonio Faria

August 15  2015

  A new method to forecast future security prices based on Open Interest(OI) is explained on this article.Data used to chart long vs short OI was picked out of The Commitments of Traders(COT) report published weekly by The U.S. Commodity Futures Trading Commission(www.cftc.gov).I only charted weekly changes of OI(in my opinion the most reliable sentiment barometer) for securities (corn, soybeans, wheat, cocoa, gold, silver, copper, british pound, japanese yen, etc) held by the commercial traders.As a rule when the commercial traders held a very low number of contracts,both long and short, for a security I decided to keep it off my charts (oats, rice, etc).It seems that when the commercial traders show weekly swings in long OI vs short OI for a security, it mirrors changes of their sentiment on it because of their better knowledge of the variables that push up or bring down the price or quote of a security or (and) they hold the highest number of contracts (both long and short) for it and therefore lead to changes of its price or quote in the financial markets.I also added some basic statistics such as Linear Regression(LR) and Standard Deviation(SD) to my charts in order to identify both trends in long OI vs short OI and turning points in long OI vs short OI respectively.Occasionally I may also calculate the Pearson Correlation Coefficient(PCC) for long OI vs short OI in order to assess the bullish vs bearish sentiment dynamics during a bullish vs bearish turning point.In short, I have two main purposes with my analytical work dealing with securities:first to find out what percentage of my forecasts is right vs wrong and secondly which securities have the highest vs lowest risk of trading when using the commercial data.However, my website and blog (futuresoptionsanalytics.blogspot.comdo not intend to give investment advice to financial market traders.I'm not a certified financial advisor.I just follow and study the financial markets.From time to time I will post my bullish vs bearish opinions for some securities on my blog and social networks but they will never be a recommendation to buy,sell or hold them.You can contact me over my email address (sunw2004@yahoo.com).

 

 

 

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