Monday, 21 May 2007

Update: COTs Signals for Gold, Silver & Copper

Good news! The Commitments of Traders give market-beating trading signals for gold, silver and copper too. I've just added the results of my best setups on the "Profit/Loss Results" page (click the link on the right).

The gold setup is on a sell since Feb. 19, and copper is on a sell since April 23. The silver setup is in cash since December 2006.

I think the silver trade is especially interesting. It opens up entirely new ground for COTs research. It's based on a combination of my best setups for (1) the commercial traders and (2) a composite of the large spec long position minus the commercials short position. Trading only when the signals concur gave a better weekly average profit and a lower maximum drawdown than for either signal alone, while being in the market only 60 percent of the time.

I found the spec-commercials composite dataset by accident! I was trying to find a good setup for the silver commercial traders and mistakenly subtracted the commercial shorts from the large spec longs. The results were better than for any of the three groups of traders. I wasn't quite sure why it worked, so in order to filter out any coincidental results, I combined the signal with my best commercial trader setup. Thus, I found an even more profitable setup!

A similar idea of a setup based on a "short squeeze" scenario was suggested to me recently by a reader of this blog, Mike Hu. Good idea, Mike!

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