Commitment of Traders Plug-in
Soybean Oil Example
In this Track 'n Trade Pro trading training video, I want to show you the July 2004 Soybean Oil contract. This is a classic example of how well the Commitment of Traders can work in helping us derive our buy/sell signals, and our times of following the large speculators as a guide to getting into the markets.
Look at this trend, we're down here in this trend, this market started to go sideways, actually giving us a little rounded bottom formation here. I mean, it's a classic rounded bottom formation. Of course, a break above the rounded bottom formation is a buy signal. That's right, what I think the commercials are.. if you look at the psychology of the commercials, I think that they're all looking as rounded bottom formations, at the top of this little point, this is where you get a buy signal on a rounded top. They all jumped in and bought this market at the same time. Look at that, nobody looked back, not once until the very top of that market.
This is a complete accumulation of contracts all the way up that trend for almost an $8,000 move that the Commitment of Traders gave us an early signal of getting in with the market right here.
Two things you never want to do, you never want to go against the seasonal trend, and you never want to go against the Commitment of Traders. You don't want to go against those large speculators. If they're all buying, you better not be selling. This is a good example of where the small speculators who generally are on the wrong side. If you look at a lot of these charts, the little small speculators, the green guys, they always go opposite of what the large blue guys go, for some reason. Which means they're losing their money.
The large speculators, when they start going long, you want to go long with them. Because they're the large ones that are moving the markets. This is a good example of where we received a buy signal. Even the small speculators, all went long on this whole uptrend. That's wonderful that means a lot of people were making money. This was a good market for everybody, Everybody made money in Soybean Oil.
The large speculators are making money, the large commercials are making money, the small speculators were making money. It's the small speculators that I'm most concerned about. I hate it when I see that the great big long uptrend, and all the small speculators are selling and going short. That's bad, I don't like to see that.
Then, we get up here to the top, we see a nice little liquidation point and the indicator comes in and says, oh, you know what? You have a position here where all the large speculators are starting to sell and go short, they're getting out of the market. Of course, the result of that is that the market goes down.
There you have it! That's a perfect classic, text book example of the Commitment of Traders giving us insight into what the market is going to do. How do they know? They know, because they are the market movers. They're the ones who push the prices up when they accumulate, prices go up, when they distribute, prices go down.