Overview
This page implements Larry Williams' setup-based trading methodology from his book "Trade Stocks and Commodities With the Insiders Secrets of the Cot Report".
Step 1: SETUP Identification
We use the COT Index (156-week stochastic) for Commercial traders to identify potential trade setups:
- Bullish Setup: COT Index (Commercials) ≥75 = Commercials are extremely net long
- Bearish Setup: COT Index (Commercials) ≤25 = Commercials are extremely net short
If Commercials are not at extremes, there is no setup and the signal is NEUTRAL.
Step 2: CONFIRMATION via Trader Group Alignment
Once a setup is identified, we check if Large Traders and Small Traders are positioned opposite to Commercials:
| Signal Strength |
Commercials |
Large Traders |
Small Traders |
Interpretation |
| 🟢🟢 STRONG BUY |
Index ≥75 (Long Extreme) |
Index ≤25 (Short Extreme) |
Index ≤25 (Short Extreme) |
All 3 aligned - strongest bullish setup |
| 🟢 BUY |
Index ≥75 (Long Extreme) |
Index ≤25 (Short Extreme) |
Not extreme |
Comm + Large aligned - good bullish setup |
| 🟢⚪ MILD BUY |
Index ≥75 (Long Extreme) |
Not extreme |
Not extreme |
Only Commercials bullish - weak setup |
| 🟡 NEUTRAL |
Between 20-80 |
Any |
Any |
No commercial extreme = no setup |
| 🔴⚪ MILD SELL |
Index ≤25 (Short Extreme) |
Not extreme |
Not extreme |
Only Commercials bearish - weak setup |
| 🔴 SELL |
Index ≤25 (Short Extreme) |
Index ≥75 (Long Extreme) |
Not extreme |
Comm + Large aligned - good bearish setup |
| 🔴🔴 STRONG SELL |
Index ≤25 (Short Extreme) |
Index ≥75 (Long Extreme) |
Index ≥75 (Long Extreme) |
All 3 aligned - strongest bearish setup |
Key Principles
- Follow Commercials: They are the "smart money" - hedgers with actual exposure to the commodity
- Fade Large Traders: Trend-following funds that get overextended at market extremes
- Fade Small Traders: The public consistently buys high and sells low
- Strongest Signals: When all three groups align - commercials one direction, large/small traders the opposite
What This Page Does NOT Include
This setup-based methodology uses ONLY COT Index extremes and trader alignment. It does NOT use:
- Williams %R (price-based timing indicator)
- 10-week Moving Average trend filter
- Volume analysis
- Seasonal patterns
- Composite weighted scoring
For composite signals that combine multiple indicators, see the Composite Signals page.
Recommended Lookback Periods by Market
- 13 Weeks (Quarterly): Stocks, Energies, Meats, Softs (Coffee/Sugar), Dollar Index
- 26 Weeks (Semi-Annual): Currencies, Metals, Cotton, Grains
- 52 Weeks (Annual): Treasury Bonds
These recommendations are based on typical market cycles and volatility patterns for different asset classes.
Data Source
COT (Commitment of Traders) data is published weekly by the CFTC (Commodity Futures Trading Commission). We track 35+ markets across stocks, currencies, commodities, and bonds.