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In a message dated 8/29/2003 10:21:56 PM Pacific Daylight Time, houstontexansvt@xxxxxxxxx writes:
Using Metastock and Reuters datalink. I am attempting to backtest
simple strategies on futures continuation charts. I am producing
false results as my backtesting does not factor in loss/gain from
rolling my positions from one contract to the next?
Anyone have a solution to solve this problem? I'm betting if I just
fill in the gaps by adjusting the entire time series when I roll the
backtest would be realistic, even though I could get some very funny
looking charts.
You are looking at a problem for which no one to my knowledge, has ever found a solution. I have UA/CSI as a data source for my commodity data and they give you all sorts of roll over and smoothing options for continuation contracts, but they simply do not work for back testing. You will even find commodity futures trading systems for sale which have been back tested only against continuous contracts. Don't even consider them because that type of back testing does not apply to current trading.
What you have to do, in my opinion, is to get history and back test against all March Wheat for all historical years, then back test against May Wheat for all historical years, and on and on. Each future month including most of the financials, have their own personality and own historical high and low points. It's a very big task to test in this manner, but some have done it. Moore research for example will sell you a system that gives you buy and sell points by specific date, that have worked for a specific futures month (not a continuous contract) for 70 to 80% or better for the past 15 to 20 years. That does not guarantee an 80% winning percentage because the trades decline in probability as you go into present time. They want a lot of money for their weekly/monthly recommendations and you have to trade all of their recommendations to make the average which means an account of $50,000 or larger, and your return is probably going to end up at 15% to 20% on an annual basis - and you can go for long periods of back to back losers. Not really very good for the high risk trading you are doing.
Tough nut to crack.
Jay
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