Backtesting Strategies Based on Commitments of Traders

You can find a newly published trading system on EarnForex.com today — CoT Report Trading Strategy. It is based on rigorous backtesting of 32 different trading methods that use various data from Commitments of Traders reports released by CFTC. According to the poll, about a half of you are using CoT reports in trading at least occasionally. The presented strategy offers an opportunity for trading based strictly on those reports. Below is the detailed description of the tools used, the backtesting process, and the results obtained.
Tools
In order to backtest anything related to the Commitments of Traders reports, it is necessary to have an expert advisor that can somehow get the data from the past history of the reports and use them to enter and exit positions. You can now download such an expert advisor for free. It is based on the an MQL5 class that reads all the fields from the CSV-formatted historical series of CoT provided by the CFTC. The data files can also be downloaded (you need to copy them to the Files folder of the Common folder of your MT5 platforms; can be accessed via MQL5 Editor: File->Open Common Data Folder).
The expert advisor can potentially trade any strategy based on any data from the CoT reports, but currently it is programmed to test only 32 strategies.
The spreadsheet contains the exact entry and exit signals (including additional exit signals for some strategies) for both buy and sell sides of each of the test strategy. The following terms are used to formulate the strategies:

Longs — long positions

Shorts — short positions

Dealer — Dealer / Intermediary traders

AssetMan/Inst — Asset Managers / Institutional traders

OI — open interest — total number of positions

Change_in_Open_Interest_All — change in open interest of categories of traders

All changes are from comparison to the previous weekly CoT report.
Backtesting Results
All tests were performed on a period from June 1, 2006, to February 7, 2014, on the following currency pairs: USD/CAD, USD/CHF, GBP/USD, USD/JPY, EUR/USD, AUD/USD and NZD/USD. A fixed position size of 0.1 standard lot was used.
The summary of the backtest results shows a table with total profit, maximum drawdown and number of trades for each tested strategy across each currency pair. The full set of all 224 backtesting reports with charts and a complete order history are also available for downloading.
The summary table reveals some interesting facts:

26 of 32 tested strategies are overall profitable on 7 currency pairs combined.

Strategy #5, which is based on buying when both percentages of Dealers and Asset Managers long positions rise, is the only strategy that is profitable across all 7 currency pairs. It is marked with green background.

Yellow background color is used for all strategies that yield more than $10,000 total profit.

The strategy that was chosen by me as the best (CoT Report Trading Strategy) is the strategy #6 — it yields the highest total profit and at the same time is the most simple of all.

Strategies #17–32 are basically the same as #1–16 except that they use additional filter for entries — they require the overall number of contracts traded during the week to rise. As can be easily seen in the summary spreadsheet, introduction of this condition leaves only 2 “yellow” strategies out of 5 in the original 16 strategies.

The most profitable currency pair is USD/CAD.

The least profitable currency pair (in fact a losing one) is AUD/USD.

The most profitable combination the strategy #8 on USD/CAD:

If you have any questions or suggestions for the strategy of using the CoT reports in Forex trading, please feel free to post them using the form below.

Backtesting Strategies Based on Commitments of Traders

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