Mike, I'm very curious to hear your thoughts as well, as to what you use and would recommend for a feed/platform, for the type of discretionary futures trading I'm interested in, based on your experience with SC, NT, and MC and how you would compare them?
The mergebackadjusted contract is the only contract that will correctly display price differences over a longer period.
Fibonacci retracements and expansions are based on a percentage of the swing size. What needs to be avoided is to distort the swing size.
The critical point is rollover date. Let us assume that there is a rollover gap of +5 points. These are the possible contracts that you can use:
Single contract: This of course is perfect to use. The only problem is that liquidity is bad if you go back 1 or 2 years, or that the contract may even not have existed then.
Merge non-backadjusted contract: This contract produces a gap on each rollover date. If a swing starts prior to the rollover gap and ends after the rollover gap, that swing is distorted. In the example above there would be an error of 5 points. You cannot calculate fib retracements or expansions from the oversized swing ....
Merge backadjusted contract: The gaps are eliminated and you get a contract which is perfectly suited
In fact this contract is the only one that you can use for a backtest of intraday trades over a period of 1 or 2 years.
Continuous contract: First we need to define what a continuous contract shall be. There are different methods used by various data suppliers to build continuous contracts. Some even call merge-backadjusted contracts continuous contracts. If it is not mergebackadjusted, it distorts the price of all trades. In real life it is impossible to trade 65% of the front month and 35% of the back month, also it is not possible to purchase at synthetic prices, which are not a multiple of the tick size.
It is a large subject, but in the end for fibs and for all backtesting purposes, the merge-backadjusted contract is the only one that works.
The following 2 users say Thank You to Fat Tails for this post:
@Fat Tails, thank you for this explanation, I had never given this issue much thought. In TOS, there is a continous contract for CL, but there are no gaps, I am not sure what method is being used, is there a way I can figure it out?
What method is used in merge backadjusted to eliminate the gaps, vs in continous? How does continous distort the price, if there are no gaps?
Were you able to figure out the issue with merge backadjusted in MC?
@Big Mike, and any other traders who have used SC, as well as MC, I would love to hear your thoughts on how the two compare for discretionary trading, regarding the issues discussed in this thread as well as other aspects.
@Futures Operator: The terminology for continuous is not clear. Continuous can be about everything.
Mergebackadjusted: You vertically shift all price bars of the prior front month contract, until the close at the day prior to rollover day matches the close of the new front month contract. By doing this you account for rollover gains or losses, you maintain relative price movements (such as required for Fibonacci analysis), but all the backadjusted part of your data series will show false price as you have vertically shifted them to eliminate the gap.
Continuous: Some people call a mergebackadjusted a continuous contract, because it continues at the expiry of one contract. When I am talking about a continuous contract, I am talking about a contract which is continuously adjusted (each day), as it is spliced from two contracts with a moving weight for the price information taken from each of them. I will stop using the term now and call it Perpetual.
Perpetual contract: Synthetic contract built from the two front month contracts. The advantage of this contract is that it does not diverge from price over long periods (with CL it is fun to use a backadjusted contract, as due to the Cushing contango you will see a top at $ 200). However, price moves - this includes momentum - are distorted. The perpetual contract does not even move in ticks, unless you round it to the next tick.
You can easily build backadjusted custom future contracts with both NinjaTrader and MultiCharts. MultiCharts allows you to roll on the day after volume moves to the new contract, but does not allow to enter rolldate and offsets manually. Actually, I roll on the day when volume is likely to shift, which is 1 day earlier compared toi what I can do with MultiCharts. With NinjaTrader you cannot roll on volume rollover, but you can manually select rolldate and offset. This means in the end you will always get what you want.
The following 2 users say Thank You to Fat Tails for this post:
I'm a bit surprised, that after one month, 5 pages, and over 1,335 views of this thread so far, still only less than a handful of traders (although very helpful) have shared their opinions/thoughts/suggestions on their discretionary trading platform of choice and how/why they chose it. It seems like people don't wish to say too much for some reason. I am sure many many traders have gone through this same process in choosing their platform, from the tens of thousands of active traders on this site. If you have, please do share your experience and what you have learned through it.
I'm beginning to demo them myself now, but as I may miss some things, and as has been stated here, it takes an enormous investment in time to learn a platform. Even an expert like @Fat Tails said one year to learn just one platform for him; so in the interest of us all sharing/learning/benefiting from each others experience, I'm still very interested in hearing comparisons and pros and cons of each on NT, MC, and SC from other discretionary retail futures traders.
I am not surprised, because if you want to judge a platform, you would need to be able to compare it to other platforms. But who has in depth knowledge of 3, 4 or 5 platforms to compare them. That might be at best a handful traders.
So what you do is
-> look through a number of fora (not only Big Mike's, but EliteTrader, Trade2Win, Trader's Laboratory)
-> read the reader's choice awards and Trader's tips of TASC (Technical Analysis of Stock's and Commodities)
-> check whether there is an active forum and community for the platform
This will bring down your choice to a few good platforms. I would never use anything exotic, as without an active forum there will be no feedback and continuous improvement.
@Fat Tails, I have done what you suggest above, and thanks to you and the others here, along with the Best of futures.io (formerly BMT) Awards, other sites Readers' Choice awards, spending many hours searching on my own, and through all the major internet trading forums, I have already narrowed my choices for now down to what seem to be the 3 most common/popular small retail trader discretionary futures platforms mentioned previously, NT, MC, and SC.
There is info out there on each, but since I need to choose one, I am more interested in comparisons and pros/cons of each directly pitted head to head. From my searching so far, I think there is limited information out there on this topic, presented in this way, which I think would be extremely useful in helping traders make the best choices for their needs.
I suspect you may be wrong that only a handful of traders will have compared at least 2 and maybe all 3 of these platforms before choosing theirs. As a trader, I love to test, to compare, to tweak, to optimize, to find the best setup for my needs, and I suspect of the over 30,000 active members here, many many other traders are like me in that sense. I know folks like @Big Mike, and others will already have done these comparisons for themselves, I think it would be helpful for all to share. I will contribute and share what I learn on this for the benefit of the community as well.