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> Why would anyone want to construct a perpetual contract? The real
> world isn't like nor is there anything like a perpetual contract
> (except, of course, a chart, of say, the S&P cash or the Dow 30).
Continuous contracts give you a continuous price history -- very
important for backtesting systems. You can't trust any system that's
tested only in a 3-month window, even 1-min intraday systems. You
have to test them over a wide range of time and market conditions.
By adjusting the prices to simulate a smoothly-connected price
series, you don't have the problems of indicators going nutso at
rollover time, etc. You can test your system with one big aggregate
test instead of having to run a separate test on every contract and
then munge them all together.
Think of what happens to your intraday indicators right after the
open, if you use DSP. Any gap opening throws them all off. You
basically can't trust them until they stabilize or unless you use SP.
Systems run into the same sort of problem at rollover time. With un-
adjusted data you have a large gap between contracts that throws off
the system's indicators and computations.
Continuous contracts aren't "real," but they're a good approximation
for testing purposes.
Gary
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