39TYPES OF CHARTS
    FIGURE   4.6    W eekly Bar Chart Perspective: Coff  ee Nearest Futures
Chart created using TradeStation. ©TradeStation T echnologies, Inc. All rights reserved. 
 ■ Linked Contract Series: Nearest Futures versus 
Continuous Futures 
 The time period covered by the typical weekly or monthly bar chart requires the use of a series of 
contracts. Normally, these contracts are combined using the  nearest futures  approach: a contract is 
plotted until its expiration and then the subsequent contract is plotted until its expiration, and so on. 
Traders should be aware that a nearest futures chart may refl  ect signifi  cant distortions due to the price 
gaps between the expiring month and the subsequent contract. 
 Figure   4.7    provides two clear examples of this type of distortion. The top chart is a live cattle 
weekly nearest futures chart; the bottom chart is a live cattle weekly  continuous  futures chart, which 
will be defi  ned momentarily. The nearest futures chart implies a large 7.175-cent (6 percent) one-
week gain in the price of cattle from the August 31 close to the September 7, 2012 close. However, 
this price jump never really took place because the price gap represented nothing more than the expi-
ration of the lower-priced August 2012 cattle contract and the switch to the higher-priced October 
2012 cattle contract. In contrast, the continuous futures chart, which, as will be explained shortly, 
refl  ects actual price movements, showed that price had rallied only 0.45 cents from August 31 to 
September 7, 2012. Almost exactly a year later the same relationship between the prices in diff  erent 
contract months produced an even more noteworthy discrepancy: While the nearest futures chart 
showed a 3.15-cent gain from August 30 to September 6, 2013, the continuous futures chart shows 
cattle prices actually  declined  1.125 cents between these dates.