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Strategies & Market Trends : Systems, Strategies and Resources for Trading Futures
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To: Patrick Slevin who wrote (1545)7/21/1998 12:08:00 PM
From: Allan Harris  Read Replies (3) of 44573
 
>How do you account for rollover in your model? Do you run off the Cash or do
>you back-adjust the data on the perpetual or do you just use a simple
>rollover;

For our S&P and Dow Jones futures models, we have chosen to create our own
back-adjusted continuous data stream from the individual futures contracts.
We do this by each quarter rolling into the new front month on the Thursday
of the week before expiration. We then process this stitched data in two
ways. First, we add a "fixed bulk" correction amount which is applied to
all data immediately prior to rollover to remove the main effects of the
larger time value of the new front month. We then apply a "fine dynamic"
correction to correct the slope of the entire series. The resulting futures
contract data stream greatly resembles the S&P cash index in character and
overall slope.

>and could you say briefly why you do it in the manner you have
>chosen?

In Trendy's earlier incarnations, several traditional overbought/oversold
oscillators were in the algorithm's mix. It was necessary, therefore, to
create a data stream which was as free as possible from the artifacts of
time value. Otherwise, price gaps and overall slope errors could have
confused the oscillators.

Your question, Patrick, is timely as we are just now completing work on a new non-neural model that trades five additional commodity contracts. Much of our "busy" work this past week has been dealing with the back-adjusted data issues and setting everything up so we have access to both adjusted and non-adjusted data streams.

Allan
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