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When I construct continuous futures data (Wheat futures for example), I get different results than barchart or tradingview. Examples below. The 1st image is my adjusted continuous data and the 2nd image is Tradingview's continuous futures chart.

My adjusted continuous data

Tradingview's continuous futures chart

The method that I use is the following:

Method that I use

When, however, I do not adjust the data it yields the following chart which now looks more like Tradingview's chart:

Unadjusted futures data

The thing is that I see a lot of unadjusted charts (I presume) thrown around from different analysts who use barchart or tradingview.

The problem comes when backtesting seasonality patterns for example. As in my adjusted data it seems that the market is trending down until mid 2019, but when looking at tradingview's it trends slightly up.

Or is there something wrong in the approach that I am using (like the back-adjustment method)?

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  • $\begingroup$ AFAIK there is no roll adjustment on TradingView. "continuous" does not necessarily mean "adjusted". $\endgroup$
    – user42108
    Sep 17 at 13:21
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There are many different approaches you can use to back adjust the price series over multiple expiries. The most common and useful (IMO) is the one similar to the one you describe. Most adjusted series do this too (eg, Bloomberg's "ED1 Comdty", etc).

However bear in mind that with this approach, each expiry adds a new value into the cumulative adjustment that you are making to the price. In other words, the further you go back, the more adjustments are being used to calculate the adjusted price. This means that the difference between the price and adjusted price can diverge significantly as you get beyond say 5 expiry adjustments. Therefore, the exact date that you use for each adjustment point matters a lot.

You'll need to create a strategy for how to pick the date, and may in some cases may have to manually tweak the dates, so as not to capture any non-standard effects of the roll market at that given point in time. Ie, if the roll market was being particularly squeezed in that day, you might not consider that indicative of the long term market process.

I worked at a place where it took one researcher an entire year to fully construct and research adjusted series for ~120 futures contracts (ED, ES etc) going back in each case 10-20 years. It's not trivial to get right. If you have a consistent source of adjusted series from a third party that you can rely on, maybe use that rather than figure it out on your own. Good luck!

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