- Most currency trading is in the spot market and the swaps market. Very little of it is taken on in the futures market.
The futures market correlates with the spot market (otherwise the difference between spot and futures would be arbitraged away) - but the COT positioning might not be a true representation of positioning in the spot market
- The COT report is prepared on Tuesday and released on Friday - so there is a lag in it and it may not represent current positioning.
Because of these weaknesses you need to use the COT report in context of a number of other different factors.
Also - forget day trading with COT - it is really a position traders tool.
However, given there is a real dearth of true volume information and no real access to level II / market depth / order book information in forex, COT does make for a nice complement to your analysis toolkit.