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Seems to me there is a lot of confusion about continuous and back adjusted
contracts. Personally I occasionally hear bad things about them. After a
thorough amount of research (mine and others) I've come to believe that in
many cases back adjusting is the only "right" way to do back testing. Many
people actually trade on back adjusted contracts because thats the way they
built the systems. If you dont trade the systems that way then all your
indicators get unfairly and erroneously distorted on contract rollover. This
is like testing something on corn and wondering why it looks different on a
cattle chart! They are completely different data streams that calculate
completely different values. So the idea is, if you built it and tested it on
back adjusted, then you should trade it on backadjusted. If you built it and
tested it on non-back adjusted, then trade it on non back adjusted.
A very good article by one of our fellow post'ers Bob Fulks on this subject
can be found at:
http://www.tradingrecipes.com/files/cntcontr.pdf
Its obviously a pdf download so it takes a few moments to load when you go to
the link.
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