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Gary,
If you plot the Net Longs of all the 3 players (Commercials, Large
speculators and Small traders), you will see that the plot of the
Commercials and Large speculators are at opposite sides about the
mean (most of the time) and the small traders closer to the mean.
You will see that the plot of the Commercials and Large speculators
are either diverging from each other or going parallel (most of the
time).
You can then watch for trend-change pullbacks or breakout signals at
the specific time on the plot where the Commercials and Large
Speculators begin converging from their extreme positions (visually
identified) on either side of the mean.
You may use Z-Scores to identify the extreme positions. Z-Scores
tend to be used mainly in the context of the normal curve, and their
interpretation based on the standard normal table. It would be
erroneous to conclude, however, that Z-Scores are limited to
distributions that approximate the normal curve. Non-normal
distributions can also be transformed into sets of Z-Scores. In this
case the standard normal table cannot be consulted, since the shape
of the distribution of Z-Scores is the same as that for the original
non-normal distribution. For instance, if the original distribution
is positively skewed the distribution of Z-Scores also will be
positively skewed.
Regardless of the shape of the distribution, the shift to Z-Scores
always produces a distribution with a mean of 0 and a variance of 1.
Regards,
Pal
--- In amibroker@xxxxxxxxxxxxxxx, "Gary A. Serkhoshian"
<serkhoshian777@xxxx> wrote:
> Pal,
>
> Thanks for the post as I've been racking my brain thinking of ways
to trade COT. Could you please elaborate on your statement below.
Specifically, how are you identifying extremes (std dev?), and when
you write "low points and turning up" are you referring to the net
commercial position. Taking it a step further, can I assume you mean
net-short commerical?
>
> Thanks,
> Gary
>
> So, for those places where the
> Commercials are at extreme low points and turning up, and the Large
> speculators are at the opposite extreme and turning down, the
market
> will probably turn down shortly (vice-versa for an upside move).
The
> small speculators are usually trading with the primary trend.
>
>
>
>
> ---------------------------------
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