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Which Futures Data Series Do You Use?

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When looking at past futures data (years earlier), do you use unadjusted or back-adjusted futures data? Which futures data series do you use for longer-term trading or when specifically looking at past highs/lows, pivot highs/lows, and gaps on a chart, not for applying indicators such as moving averages, etc.? Depending on the data series that a trader uses, this could have an impact in a trader's analysis when using Wyckoff and Market Profile based principles.

 

Here's an example. The following chart is of the S&P pit contract using back-adjusted data due to rollover. Notice that the all-time high is 1759.90.

 

SP-adjusted.GIF.ed1f8c84e44f9ab809d028bbc19f92c2.GIF

 

The next chart is of the S&P pit contract using unadjusted data. Notice that the all-time high is 1574.

 

SP-unadjusted.GIF.ea326e66ccfe639f9f7d5370eebb61f6.GIF

 

From a Wyckoff perspective, a trader can say that there was an Upthrust in the second chart because it tried to breakout from the bracket above all-time highs and failed (i.e., returned back to the bracket). Conversely, at the bottom of the bracket, a trader can say that there was a Spring. This analysis could not be made if back-adjusted data were used.

 

The following chart is of the S&P cash index. This data seems to corroborate that using unadjusted futures data is the correct data series to use when performing a market analysis as described in my example above. Personally, I've been using unadjusted futures data, but I've seen traders using both data series for their analysis, including trading educators. What do you think?

 

inx.GIF.337d97d0184fb2e296d76b887b9f56f8.GIF

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There is a good article at Futures Charting that discusses when to use adjusted vs unadjusted futures data. Basically, the conclusions of that article are:

 

  • Use unadjusted futures data for trading based on past support/resistance levels. Unadjusted futures data keeps the price action pure (i.e., price levels are only changed by the market itself not by adjustments made to address the gaps during rollover).
  • Use adjusted futures data when back-testing or using technical indicators, like moving averages, because of distortions caused by gaps during the rollover.

FYI: For those using TradeStation, the symbol for adjusted data is preceded by @ (e.g., @SP.P) and the symbol for unadjusted data would be in the format of @SP.P=108xn.

 

Another interesting observation made by the author of the article is that the gap caused by rollover, as seen in a chart with unadjusted prices, are often viewed by traders as normal gaps and are usually filled. Something to watch...

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The only thing that makes sense to me when testing strategies on past data is to use two sets of data. The signals should be from adjusted data since each contract, which is what the signal is based on, does not have gaps. The results however should be based on unadjusted data since that is what you will have to deal with when holding a position into a rollover.

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