which price series to use?
Posted: Thu Aug 28, 2003 8:47 am
Say I currently hold a position in a July futures contract and I'm using a 14-day ATR trailing stop. Then when it's time for me to rollover to the September contract, which price series should I use to calculate the trailing stop.
At first, I thought it should the September contract since that is the contract that I will be trading now, but the September contract may have been a different beast for the past 14-days because liquidity may have been lacking then. But now, it is the new front-month contract and it also seems reasonable to use the price series of the previous front-month contract to calculate the 'starting rollover' ATR, which is the July contract.
The latter is the standard approach if one is using a continuous data series I believe. I haven't yet checked if this is a significant issue.
Louis
At first, I thought it should the September contract since that is the contract that I will be trading now, but the September contract may have been a different beast for the past 14-days because liquidity may have been lacking then. But now, it is the new front-month contract and it also seems reasonable to use the price series of the previous front-month contract to calculate the 'starting rollover' ATR, which is the July contract.
The latter is the standard approach if one is using a continuous data series I believe. I haven't yet checked if this is a significant issue.
Louis