How to Interpret COT Reports Like a Pro-Follow the Smart Money

By Cot-Trading - Wednesday, July 9, 2025 - No Comments

Fundamental analysis in trading is very important for understanding the general trend of an asset.

But since most traders struggle with reading and interpreting complex economic data, I’m going to share with you today a quick shortcut to simplify the process.

Instead of diving into endless news and reports, we’ll follow what the "big bosses" banks and institutions are doing. The tool we’ll use is called the Commitment of Traders (COT reports).

So, how do you quickly tell whether institutions are buying or selling, without getting lost in economic details?

Here’s a simple method based on just two key values: Net Positions and Open Interest.

Quick Guide to Institutional Sentiment:

Open Interest ↑ + Net Positions ↑ = Strong Bullish Trend (new money entering the market)

Open Interest ↑ + Net Positions ↓ = Strong Bearish Trend (increased short positions)

Open Interest ↓ + Net Positions ↑ = Short Covering Rally (weak bullish move)

Open Interest ↓ + Net Positions ↓ = Long Liquidation (weak bearish move)

For example, this week according to the latest COT reports:

Gold is showing bearish sentiment with a weak move (likely due to long liquidation).

NASDAQ is showing buying interest but also with a weak move (possibly a short covering rally).

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