Futures charts and expiry advice please

[Vortex]

Hello all,

I am a fund manager from Switzerland specialising in FX and wish to explore futures trading as part of our portfolio. We are systematic traders. I have three questions that I can't seem to find in any other way and hope some of you may help me out. I will ask them one by one if you don't mind.

1) When looking at a historical chart of a futures contract (e.g. an index future), I am looking at a continuous chart.
Does that mean that all the individual contracts have been connected? How is this done? I assume at the time of expiry, the difference between the expiring contract and the new contract is simply added or subtracted to every historical data-point to make a single graph?
Is this something you do yourself as a trader, or does your charting software or data provider do automatically for you?

Thanking you kindly.

 

[nazzdack]

Quote from Vortex:
----continuous chart.
----all the individual contracts have been connected....
----I assume....
----....every historical data-point to make a single graph?

1) To look at a continuation chart can be good to get a "big picture" view of a market but shouldn't be used for shorter time frames because of the likely price difference between contracts.
2) It's better to look at contract-specific charts when rolling out of an expiring contract into another actively traded contract. This way, you're more closely comparing apples-to-apples instead of apples-to-oranges.

 

[uexkuell]

Quote from Vortex:

1) When looking at a historical chart of a futures contract (e.g. an index future), I am looking at a continuous chart.
Does that mean that all the individual contracts have been connected?

2) How is this done? I assume at the time of expiry, the difference between the expiring contract and the new contract is simply added or subtracted to every historical data-point to make a single graph?

3) Is this something you do yourself as a trader, or does your charting software or data provider do automatically for you?

1) Yes

2) There are different approaches, you need to know which was chosen by your provider.

For information about the possible approaches:
www.tradingrecipes.com/files/cntcontr.pdf
http://www.premiumdata.net/support/...scontinuous.php
http://www.csidata.com/cgi-bin/getM...tedoverview.htm

3) Some charting packages do it for you. Many don't.


What you did not ask:
Is it desirable to use continuous contracts?

It depends strongly on your trading strategies.
For some is important for others (fortunately) you don't need continuous charts.

 

[Vortex]

Thank you so much both you. Much, much appreciated.

By the way, I also found this good article on this subject:
http://www.automated-trading-system...ht-to-know-about-continous-futures-contracts/

My other question is as follows:

It appears as if a great number of futures traded in the US are near-24 hour trading, which means there is little chance of gaps between days.

As systematic traders we rely heavily on entry levels and stop-loss levels which are left in the market. So it is impossible for us to trade anything which have any significant gaps overnight (or from one session to the next).

I have noticed that almost all of the futures traded here in Europe on Liffe or Eurex have many hours between days (sessions), hence with plenty of overnight gaps. Am I reading this right? Why can the US trade almost 24 hours and Europe not? Does that mean I cannot trade anything in Europe due to this? (With a few exceptions like Brent Crude I think).

Thanks again for the kind help.

 

[NetTecture]

Quote from Vortex:
It appears as if a great number of futures traded in the US are near-24 hour trading, which means there is little chance of gaps between days.

To be more exact - CME Group has a 15 minute outage every day. The only "significant real" outage is the weekend. The 15 minuet outage normally happens (Central eureopan time) around 22:00 to 22:15 IIRC. Naturally noly when night / day time are in sync (US changes one week different, so twice a year the break is one hour off for a week, once early, once late).

 

[Vortex]

Thank you for that - that is what I mean, it really makes it convenient and good for systematic trading.
Frankly, I don't know what strategy (systematic or otherwise) can work in markets which have long closing times and potentially large gaps, with the exception of day-traders who close out their positions at day-end. Or possibly traders who take postions lasting months on end.

The websites for both Eurex and Liffe are quite complex and information-rich, and I don't know how many on this forum trade European futures, but I just want to make sure, there seem to be no futures market or instrument in Europe which are near-24 hour as their US counterparts? Liffe seem to come a bit closer due their link with NYSE, but it is unclear.

Thanks a million!