Befriend the Trend Trading Message Board

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Strategies & Market Trends : Befriend the Trend Trading

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Dec 19 4:00 PM EST

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To: jesso who wrote (8196)	6/10/2000 7:42:00 PM
From: booters	Read Replies (2) of 39683

I have a general question about backtesting please. Some 20 years ago I started in this business developing trading systems for the futures market. In those days if you did that you did it from scratch. Wrote your own code and all, no canned programs. Alot of the data we used was also collected inhouse. Because of all this one was very familiar with exactly what the program was doing and exactly what the data looked like ( we had our own programs to look at and clean the data). I re-entered the fray a short while back and pulled out some of my old stuff and went to work again, thinking it would be much easier now because of all the historical data you can get easily. After some research into who was widely used and respected for providing data I ordered some (Futures data). After a few days I realized something was not right and looked very closely at how they compiled it and rolled from one contract to the next. The process was horribly flawed and after pressing them they finally admitted it. Bottom line is you can not use the data to properly roll a position from one contract to the next and this is a major provider of historical data. There are many people out there backtesting programs and getting flawed results without knowing it. I do not mention this to scare anybody and I realize futures data and stock data (most of you use stock I think) are very different but it does lead to the question I have. If I am correct (my experience is with futures) when a stock splits say 2 for 1, then the past historical data is divided in 2 so the transition is smooth. This being the case then any fixed number used in the formula for testing that was not aware of the adjustment would return false data. Example, buy if price goes 1/2 point above previous days high. So finally the question. Do the canned programs many of you use take this into account? boots

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