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> Now, how do I actually trade a mechanical trading system over real
> limited-life futures contracts ???
>
> If I have various indicators that require certain number of daily
> bars to analyze, what do I do when a contract approaches
> expiration ?
That depends on how many days your system needs to "spin up." If
you're trading on 30min or 60min bars or similar, there's probably
enough history in the contract *before* it becomes the front contract
to run your system. E.g. I do this with a system that runs on 60min
SP. I just make sure I'm collecting data on the next contract as
soon as the old contract starts, and it gets enough data to get the
indicators & calculations up to speed. When I checked it out against
continuous data, the trades were close enough to identical that I
don't worry about it any more.
If you're trading e.g. on daily bars, you've got a bigger challenge.
There probably aren't enough daily bars to get your system
initialized in time to trade the new contract. I don't think TS
offers a very good solution for this, unless you do something like
Jimo does and "roll-your-own" continuous contract in an OMZ.
> Which contract data do I use to get a signal - the old or the new one ?
I always use the contract that I'm going to trade. This is critical
if your system issues stops. If you run the system on the old
contract but intend to trade the new, your stops will be at the wrong
prices.
> What happens at the cutover to the new contract ?
I just switch my charts to the new contract and start trading the new
one. If you're in a position in the old contract, you'll have to
roll it to the new contract.
Gary
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