What is a COT Index & 3-Year Percentile Ranking?

A COT Index is a normalized oscillator ($0 \to 100$) that evaluates current institutional net positioning relative to its historical high and low over a rolling 3-year (156-week) lookback window.

1. Normalizing Historical Ledgers

Raw contract numbers fluctuate over time as market participation grows. A COT Index normalizes these raw values into a standardized percentile:

$$\text{COT Index} = \frac{\text{Current Net Position} - \text{3Y Minimum}}{\text{3Y Maximum} - \text{3Y Minimum}} \times 100$$

2. Identifying Market Extremes

  • COT Index > 80%: Managed Money is heavily long, indicating bullish momentum but warning of potential buyer exhaustion.
  • COT Index < 20%: Managed Money is heavily short or liquidated, signaling extreme bearish sentiment and high short-squeeze potential.
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Written & Validated by AurumGamma Quantitative Research

AurumGamma specializes in institutional derivatives modeling, CME Gold options order flow, and automated CFTC Commitment of Traders ledger ingestion for XAUUSD traders.

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