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Back-adjusted, Continuous contracts - best for support and resistance?
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Back-adjusted, Continuous contracts - best for support and resistance?

  #11 (permalink)
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josh View Post
Here you go buddy, yes this is IQFeed.

I am using the #C which, as FT71 mentioned, IRT defaults to. IRT does not have the ability to merge contracts, but a comparison of NT's merging with IQFeed's #C shows that they are tick-for-tick identical except for one or two ticks shifted going back to late last year, and that may even be because I may have accidentally changed a rollover date for NT's merging function.

Note that I am using 2 price levels per histogram bar (so each bar in the histogram represents 0.50, not 0.25), to make the levels clearer as there are so many and it would otherwise blur.

Thanks. OK, here is 2 ticks per level for January 1 to today, using @ES#C in Sierra.

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  #12 (permalink)
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Cool, looks identical from what I can see. How are you liking Sierra and its profiling capabilities? (don't want to go OT here sorry)

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  #13 (permalink)
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josh View Post
Cool, looks identical from what I can see. How are you liking Sierra and its profiling capabilities? (don't want to go OT here sorry)

It is fantastic. Check out the webinar on Thursday for more info.

Mike

Due to time constraints, please do not PM me if your question can be resolved or answered on the forum.

Need help?
1) Stop changing things. No new indicators, charts, or methods. Be consistent with what is in front of you first.
2) Start a journal and post to it daily with the trades you made to show your strengths and weaknesses.
3) Set goals for yourself to reach daily. Make them about how you trade, not how much money you make.
4) Accept responsibility for your actions. Stop looking elsewhere to explain away poor performance.
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6)
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  #14 (permalink)
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Hey guys, I need your help here.

I've always been a continuous non back-adjusted chart guy, never quite liked the idea of having past prices altered due to the adjustment since I would lose the real highs and lows traded back then. Been testing both charts, true, using my Gann swing reading the gaps are a problem but it was never a problem capable of ruin my setups, not with ES.

Been trying to change and have all my charts back-adjusted but everytime I go back more than 3 months my brain starts to scream at me - THAT HIGH IS NOT A TRUE HIGH. PRICES NEVER TRADED AT THAT LEVEL 3 MONTHS AGO.

But this weekend I've been building my charts since I'm starting to trade the ZN and ZB and the ZN chart is really bugging me.
The ZB chart is much like ES, the adjustment doesn't generate much difference in terms of patterns, but the ZN...

Compare both charts, the non back-adjusted...

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... and the back-adjusted:

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This is a HUGE difference. In one we have a higher low and in the other a lower low.
Even the profiles can be quite different between both readings.
I agree that there's no right or wrong way to do this. Both readings have their usage but you cannot use both at the same time since both might give divergent readings.

Like I said, I've been reluctant going to back-adjusted charts but the differences that ZN charts are generating are quite big for me to continue to use non back-adjusted.
I just cannot go back more than 3 months because I'll start to doubt those areas of S/R and my head starts to spin again.

But I'd like to hear more opinions on this from you guys.

Thanks.

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  #15 (permalink)
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arnie View Post
But I'd like to hear more opinions on this from you guys.

The question is this: which matters more to you--relative prices, or absolute prices?

It looks like your contract rolled around Sept 4. That day on the non-backadjusted chart shows a huge gap down. Well, what matters to me on Sept 4 is, how is the market trading today, relative to yesterday? Well, the non-BA chart shows that the market is trading completely below the prior day. Of course, if you look at an ETF like IEF (7-10 year), and if you look at the December contract itself, you will see the the market is actually trading within the upper half of the prior day's range on Sept 4, not completely below it.

This is why I prefer back-adjusted charts. I care about how the market is trading relative to prior prices.

As to Gann stuff and larger swings, if you are trading ES longer term then why not look at the cash chart? With no rollover, it gives a true representation of actual prices traded, as well as relative swing accuracy.

Remember, this is an imperfect art (managing rollover), not a science (futures that is, not stocks etc.). Personally, absolutely traded past prices are irrelevant in a futures contract, because that contract no longer exists, so I prefer a back-adjusted chart that shows accurate relative prices (again, for longer than 2 or so rollover cycles I will look at the cash market or ETF for some additional insight if it's really that important).

Attached is the December notes contract. So, no adjusting, no rollover, no modification. Which one does it look like to you? That is the way I look at how I want my continuous contract to look also.

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Last edited by josh; October 14th, 2012 at 08:35 PM.
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  #16 (permalink)
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@arnie,

Plot SPX.XO on IQFeed for longer term analysis, since it is the cash price. You might also look at things like SPY to give you more relevant long term levels.

Personally, I use back-adjusted charts for the reasons @josh listed.

Mike

Due to time constraints, please do not PM me if your question can be resolved or answered on the forum.

Need help?
1) Stop changing things. No new indicators, charts, or methods. Be consistent with what is in front of you first.
2) Start a journal and post to it daily with the trades you made to show your strengths and weaknesses.
3) Set goals for yourself to reach daily. Make them about how you trade, not how much money you make.
4) Accept responsibility for your actions. Stop looking elsewhere to explain away poor performance.
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  #17 (permalink)
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arnie View Post
Hey guys, I need your help here.

I've always been a continuous non back-adjusted chart guy, never quite liked the idea of having past prices altered due to the adjustment since I would lose the real highs and lows traded back then. Been testing both charts, true, using my Gann swing reading the gaps are a problem but it was never a problem capable of ruin my setups, not with ES.

Been trying to change and have all my charts back-adjusted but everytime I go back more than 3 months my brain starts to scream at me - THAT HIGH IS NOT A TRUE HIGH. PRICES NEVER TRADED AT THAT LEVEL 3 MONTHS AGO.

But this weekend I've been building my charts since I'm starting to trade the ZN and ZB and the ZN chart is really bugging me.
The ZB chart is much like ES, the adjustment doesn't generate much difference in terms of patterns, but the ZN...

Compare both charts, the non back-adjusted...

Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).


... and the back-adjusted:

Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).


This is a HUGE difference. In one we have a higher low and in the other a lower low.
Even the profiles can be quite different between both readings.
I agree that there's no right or wrong way to do this. Both readings have their usage but you cannot use both at the same time since both might give divergent readings.

Like I said, I've been reluctant going to back-adjusted charts but the differences that ZN charts are generating are quite big for me to continue to use non back-adjusted.
I just cannot go back more than 3 months because I'll start to doubt those areas of S/R and my head starts to spin again.

But I'd like to hear more opinions on this from you guys.

Thanks.


Each charting method serves its purpose. Futures contracts do have rollover dates, which implies a discontinuity shown as rollover gap. You can either

- leave the gap on the chart
- divide the gap into little chunks which are inserted day by day (perpetual contract)
- eliminate the gap (backadjusted or forwardadjusted contract)

For the purpose of backtesting you want the gap eliminated. For any observations that rely on absolute price levels, you want to keep the gaps.

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  #18 (permalink)
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Relative or absolute prices is indeed the question here.

I've always had the tendency to look at prices as absolute, hence, my problem in accepting the backadjusted charts.

It's not easy to lose 10 years of preconceived ideas
You see it in front of you, you know that makes perfect sense, but then your brain short-circuits and you get back at those preconceived ideas that you don't even know from where they came from.

There's a shock treatment for those that decide to stop smoking. An electric shock is applied on 3 zones inside your ear and on your forehead if I'm not mistaken and the zone in your brain that stores the "nicotine addiction" is destroyed, making your urge for a cigarette completely disappears.
I wish there was something similar for us to completely reset that part of our brain where we store all our preconceived ideas. We could delete certain knowledge that is making us lagging.

futures.io (formerly BMT) has been a true source of knowledge and an awakening.

Thank you!

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  #19 (permalink)
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understand and you will see..

The question is why back adjust?

A futures contract is what it says on the tin. A contract to buy or sell the physical the real thing in the future, be that corn, oil, bonds stocks etc.

So a gap occurs in a futures contract because .......... of the "cost of carry".

Honest, put it in wiki...

So at the start of a contract the cost of carry is high and at the end of a contract the cost of carry is 0. (In bonds its called basis)

So in the real world i.e. the physical real stuff mkt you don't get gaps i.e. spot fx mkts.

So the answer is ... what does the cost of carry have to do with the underlying supply/demand for oil corn stocks etc. ..............Nothing.

So back adjusting makes sense, sort of.

However trading support and resistance doesn't, that includes secret volume lvls or whatever nonsense played out by countless idiots.

If that causes your cortisol to spike look up plato's allegory of the cave, and don't make me drink hemlock.

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  #20 (permalink)
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Thanks to those who contributed to this thread. A few things have been cleared up for me.

Just one question though, say im using back adjusted charts and manually backtesting a discretionary S/R based methodology. I go through +-1 year worth of charts manually marking levels, zones, profile levels, and the resulting trades. Will the results I get from that manual exercise be an accurate representation of what really would have happened at the time?

For example say i've got a composite volume profile over a 20 day period. That 20 day period however happens to span over 2 contracts. Will the levels that im manually marking in hindsight a year later be an accurate representation of what would really have happened? ie: those trades that im marking, would they have been taken as seen in hindsight a year later on the back adjusted charts?

Many thanks.

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Last edited by DarkPoolTrading; January 30th, 2014 at 03:37 AM.
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