Traders' Roundtable

I've tested my long term trend following systems, using either reverses adjusted method (to link future's contract) or non adjusted methods.
I've obtained a much better performance by using reversed adjusted method, than non adjusted.
In real trading does reversed method provide the same performances or not? What is it better to use?
Regards

Hi alcontes,

As you have found, the gaps between contracts makes non-adjusted data untradeable – personally I trade the same back-adjusted contract that I use for testing.

I am interested in the performance of the different flavours of adjusting. I am about to send CSI some cash just so I can get UA for the purpose of creating prices adjusted using different algorithms (I believe they have 3 or 4 of them). AFAIK, the data provided free with VT is adjusted but only on a single method.

Here below look at performances with both equity curves of the same system same instruments but one is adjusted and while the other is not .As you can see there's a great difference

Even within backadjusted contracts there are many different possibilities to test. Detrending for instance which puts a long time series in today's prices and, it is argued, helps to correct the long only bias in inflationary commodities which have risen over time. And price series where backadjusting has caused prices at the start of the series to go negative. Then there is all sorts of fun to be had with roll dates. With the Eurodollar and the short term interest rate products many have found it preferable to trade a far out contract rather than the near term for increased volatility. With UA you can test this out. Others have found an advantage in rolling on a specified day for a particular contract rather than on Open Interest. Or again, you can choose which contract months to trade. Do you really want the expense of trading EVERY month in the energy contracts? Backtesting might show perfectly acceptable results from trading every other months contract, or quarterly contracts.

There is a great deal more to test than just the difference between non adjusted and adjusted contracts. Endless hours of fun.

AFJ Garner wrote:There is a great deal more to test than just the difference between non adjusted and adjusted contracts. Endless hours of fun.

Very well said! I agree completely.

Searching around on the Roundtable unearthed the following message, in which somebody has already done the first half of an experiment (create the different continuous contracts), to make it easier for you to do the second half (run them on a trading system and take note of the different outcomes).

viewtopic.php?p=6203&highlight=console#6203