What data to use for LongTerm Backtesting

Discussions about the testing and simulation of mechanical trading systems using historical data and other methods. Trading Blox Customers should post Trading Blox specific questions in the Customer Support forum.
Post Reply
CyTrend
Roundtable Fellow
Roundtable Fellow
Posts: 57
Joined: Mon Oct 25, 2010 5:28 pm

What data to use for LongTerm Backtesting

Post by CyTrend »

Hello I was wondering what is the correct/preferred/or best way adjust historic future prices for intermediate term trend following systems. My inclination is to use perpetual futures (as defined by CSI) since it should give the purest signals. For example if you are trading TYs then as they get closer to expiry the will go down in price as their yield decreases which is why you also see about a 10bp jump in TY futures around the roll. My understanding is that perpetual futures should get rid of this. Argument works for OIL and other futures as well.

The case for back-adjusted futures is that you have the live prices however if you roll futures that have backwardation or contango this should add a sort of trend to your prices over long periods because you are adding or subtracting a consistent amount.

I would appreciate if anyone could guide me on this. I have also attached a paper i found on the topic which might better explain my dilemma.

thanks,
Cy
Attachments
back-Ajusting Futures Contracts.pdf
(38.12 KiB) Downloaded 302 times
sluggo
Roundtable Knight
Roundtable Knight
Posts: 2987
Joined: Fri Jun 11, 2004 2:50 pm

Post by sluggo »

As you might expect there are many posted messages, here on the Trader's Roundtable, about this topic. Here are a few examples:

viewtopic.php?t=3005

viewtopic.php?p=21782&highlight=continu ... ract#21782

viewtopic.php?t=2593&start=0&postdays=0 ... s+contract

viewtopic.php?t=7981

viewtopic.php?t=6604
Post Reply