I believe essential for good-practice back-testing. Silver at what is a rolling spot forex contract moment is SIZ09 i.
64,000 Question: How do you stitch the data? Easy, you might say: just chain all the contracts one after the other. Silver currently December 09, March 10, May 10, etc. That selection process determines the actual contract to consider for any given date. When a stock splits, you effectively get X shares for every Y shares that you hold and the price is adjusted accordingly to reflect market capitalization. Proportional back-adjustment splicing for Futures contracts For Futures contract we can apply the same process of proportional back-adjustment at every contract roll-over.
You would determine the adjustment ratio by dividing the price of the new contract by the price of the old contract. The March contract has been lowered to join the newer contract with no gap. There might still be some concerns related to actual tick size vs. I will address in a later post.
I’m in about the same development phase as you are with my trend following system. I have UA and am trying to find the best contract backwardization method for system testing. Thanks I’ll try to keep it rolling. What back-testing software do you use?
Would be good to compare notes. Good to see your blog and the posts are excellent. Thanks Matt, I enjoy your blog too! This is a good post that illustrates a variety of clever mechanisms for massaging data for easy backtesting of futures strats. That said, for my money a much better approach is to leave the futures data alone and smarten up your strategies so they don’t look to trade a specific contract but instead trade the current most active contract. This avoids all the data mangling issues you mention as well as providing a strategy that can be deployed directly into the market. It also enables you to backtest strategies which are trading the curve instead of just the most active or front contract.