21 lines
1.8 KiB
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21 lines
1.8 KiB
Plaintext
46A COMPLETE GUIDE TO THE FUTURES MARKET
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The limited price data available for many futures contracts—even those that are the most actively
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traded contracts in their respective markets—makes it virtually impossible to apply most chart analy-
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sis techniques to individual contract charts. Even in those markets in which the individual contracts
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have a year or more of liquid data, part of a thorough chart study would still encompass analyzing
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multiyear weekly and monthly charts. Thus, the application of chart analysis unavoidably requires
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linking successive futures contracts into a single chart. In markets with very limited individual con-
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tract data, such linked charts will be a necessity in order to perform any meaningful chart analysis. In
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other markets, linked charts will still be required for analyzing multiyear chart patterns.
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■ Methods of Creating Linked-Contract Charts
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Nearest Futures
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The most common approach for creating linked-contract charts is typically termed nearest futures. This
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type of price series is constructed by taking each individual contract series until its expiration and
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then continuing with the next contract until its expiration, and so on.
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Although, at surface glance, this approach appears to be a reasonable method for constructing
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linked-contract charts, the problem with a nearest futures chart is that there are price gaps between
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expiring and new contracts—and quite frequently, these gaps can be very substantial. For exam-
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ple, assume the September coff ee contract expires at 132.50 cents/lb and the next nearest con-
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tract (December) closes at 138.50 cents/lb on the same day. Further assume that on the next day
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FIGURE 5.1 March 2016 Russell 2000 Mini Futures
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Chart created using TradeStation. ©TradeStation T echnologies, Inc. All rights reserved. |