NexusFi: Find Your Edge


Home Menu

 





how to chart NG?


Discussion in Commodities

Updated
      Top Posters
    1. looks_one Fat Tails with 3 posts (6 thanks)
    2. looks_two canoekoh with 3 posts (3 thanks)
    3. looks_3 Devil Man with 2 posts (1 thanks)
    4. looks_4 trendisyourfriend with 1 posts (0 thanks)
      Best Posters
    1. looks_one Fat Tails with 2 thanks per post
    2. looks_two canoekoh with 1 thanks per post
    3. looks_3 muttoez with 1 thanks per post
    4. looks_4 Devil Man with 0.5 thanks per post
    1. trending_up 1,291 views
    2. thumb_up 11 thanks given
    3. group 5 followers
    1. forum 9 posts
    2. attach_file 0 attachments




 
Search this Thread

how to chart NG?

(login for full post details)
  #1 (permalink)
canoekoh
Chicago, IL
 
Posts: 70 since May 2018
Thanks Given: 56
Thanks Received: 98

I was wondering how you guys chart NG futures on higher timeframes like 4H, 12H, 1D.

When using back-adjusted continuous charts, the offsets end up creating totally incorrect prices even if it smooths out the chart. It creates misleading, nonexistent trends. If I use non-back-adjusted continuous charts, there ends up being gaps that are so wide the charts look ridiculous.


For example, for the CME NG contracts, it rolled over on 10/24/2016 and the gap ends up being from 2.8 to 3.3!!!

1) I wasn't trading NG back then but can someone explain to me why on 10/24/2016, the front month NG contract closed at 17:00pm est at $2.8 and then when it got rolled over to the next-month contract one hour later, the next-month contract opened trading at 18:00pm est $3.3? Aren't the prices for the spot-month and the next-month contracts supposed to get closer to each other as it approaches rollover?

2) For now, I'm using the CFD NG charts from Oanda which don't suffer from these rollover gaps and seem to reflect more accurate prices. I don't know much about CFDs but how comes CFD charts don't suffer the same drawbacks as continuous futures charts? Shouldn't CFDs on commodities futures also have expiration dates?

Reply With Quote
The following user says Thank You to canoekoh for this post:

Can you help answer these questions
from other members on NexusFi?
Trader Dale [email protected] or Scammer Dale
Trading Reviews and Vendors
Volume profile TradeStation
EasyLanguage Programming
NT7 Indicator Script Troubleshooting - Camarilla Pivots
NinjaTrader
Request for MACD with option to use different MAs for fa …
NinjaTrader
The space time continuum and the dynamics of a financial …
Emini and Emicro Index
 
Best Threads (Most Thanked)
in the last 7 days on NexusFi
Tao te Trade: way of the WLD
34 thanks
GFIs1 1 DAX trade per day journal
24 thanks
Supertradersams Thread Journal on NQ/MNQ
23 thanks
Deaddogs Stock Trading
20 thanks
Leaving CFD trading and learning futures
13 thanks

(login for full post details)
  #3 (permalink)
 
Devil Man's Avatar
 Devil Man 
Fort Lauderdale
Market Wizard
 
Experience: None
Platform: Ninjatrader, Python API
Broker: CQG
Trading: ES,NQ,CL
Posts: 841 since Oct 2009
Thanks Given: 3,354
Thanks Received: 1,517



canoekoh View Post
I was wondering how you guys chart NG futures on higher timeframes like 4H, 12H, 1D.

When using back-adjusted continuous charts, the offsets end up creating totally incorrect prices even if it smooths out the chart. It creates misleading, nonexistent trends. If I use non-back-adjusted continuous charts, there ends up being gaps that are so wide the charts look ridiculous.


For example, for the CME NG contracts, it rolled over on 10/24/2016 and the gap ends up being from 2.8 to 3.3!!!

1) I wasn't trading NG back then but can someone explain to me why on 10/24/2016, the front month NG contract closed at 17:00pm est at $2.8 and then when it got rolled over to the next-month contract one hour later, the next-month contract opened trading at 18:00pm est $3.3? Aren't the prices for the spot-month and the next-month contracts supposed to get closer to each other as it approaches rollover?

2) For now, I'm using the CFD NG charts from Oanda which don't suffer from these rollover gaps and seem to reflect more accurate prices. I don't know much about CFDs but how comes CFD charts don't suffer the same drawbacks as continuous futures charts? Shouldn't CFDs on commodities futures also have expiration dates?

@canoekoh you'll need to set up a multi-session template

Reply With Quote
The following user says Thank You to Devil Man for this post:
(login for full post details)
  #4 (permalink)
canoekoh
Chicago, IL
 
Posts: 70 since May 2018
Thanks Given: 56
Thanks Received: 98


Devil Man View Post
@canoekoh you'll need to set up a multi-session template

Hi, thanks for the advice. I'm actually using Sierra Chart but anyways, could you explain what's a multi-session template and how it helps? Thanks.

Reply With Quote
The following user says Thank You to canoekoh for this post:
(login for full post details)
  #5 (permalink)
 
Fat Tails's Avatar
 Fat Tails 
Berlin, Europe
Market Wizard
 
Experience: Advanced
Platform: NinjaTrader, MultiCharts
Broker: Interactive Brokers
Trading: Keyboard
Posts: 9,888 since Mar 2010
Thanks Given: 4,242
Thanks Received: 27,098


canoekoh View Post
I was wondering how you guys chart NG futures on higher timeframes like 4H, 12H, 1D.

When using back-adjusted continuous charts, the offsets end up creating totally incorrect prices even if it smooths out the chart. It creates misleading, nonexistent trends. If I use non-back-adjusted continuous charts, there ends up being gaps that are so wide the charts look ridiculous.

A futures contract has an expiry date. When you roll to a new contract, the new contract has a different expiry date. The current price of a futures contract depends on the price expectation at expiry and interest rate levels. As a result there will be a gap.

Whether you use non-adjusted or backadjusted continuous charts, depends on the methods or indicators that you use. In general a backadjusted chart as a lot of advantages over a non-adjusted chart. For example,

- 90% of all indicators will only work correctly with backadjustd charts
- backtests will show correct results with backadjusted charts but need to be corrected for non-adjusted charts

You should not care about incorrect prices, unless your trading decisions depend on actual prices.

The gap depends on the selected roll date and the time of day. It is important to calculate the gap at a moment when the market is liquid.

Example: By default NinjaTrader 7 uses the last traded price of the regular session (last second of the settlement period). This leads to reasonable offsets and correct gaps.

By default NinjaTrader 8 uses the last traded price of the trading day. This is an inacceptable approach as the markets are typically illiquid during that time. The resulting gaps are erroneous and you need to correct them manually, by selecting a different roll day and a different offset. That approach does not make sense.

In the end it is your responsibility to select a proper offset and configure your trading software accordingly.


canoekoh View Post
1) I wasn't trading NG back then but can someone explain to me why on 10/24/2016, the front month NG contract closed at 17:00pm est at $2.8 and then when it got rolled over to the next-month contract one hour later, the next-month contract opened trading at 18:00pm est $3.3? Aren't the prices for the spot-month and the next-month contracts supposed to get closer to each other as it approaches rollover?

This is as expected. The prices are NOT expected to get closer to each other, but typically the differential between the two contracts is maintained. This is how futures markets work. Price expectations depends on expected supply & demand and interest rates. Expected supply & demand is different on expiry dates for the old and new front month contract.


canoekoh View Post

2) For now, I'm using the CFD NG charts from Oanda which don't suffer from these rollover gaps and seem to reflect more accurate prices. I don't know much about CFDs but how comes CFD charts don't suffer the same drawbacks as continuous futures charts? Shouldn't CFDs on commodities futures also have expiration dates?

I would never touch CFDs. Those are private contracts where you trade against the dealer that sets the prices. The CFD prices are probably calculated by redistributing the gap over 21 business days and splicing the two contracts together. Think of it as a gap which is divided into little slices which is inserted over the entire month to compensate for the different expiry dates of the underlying futures contract.

Reply With Quote
The following 4 users say Thank You to Fat Tails for this post:
(login for full post details)
  #6 (permalink)
 
Fat Tails's Avatar
 Fat Tails 
Berlin, Europe
Market Wizard
 
Experience: Advanced
Platform: NinjaTrader, MultiCharts
Broker: Interactive Brokers
Trading: Keyboard
Posts: 9,888 since Mar 2010
Thanks Given: 4,242
Thanks Received: 27,098


canoekoh View Post
Hi, thanks for the advice. I'm actually using Sierra Chart but anyways, could you explain what's a multi-session template and how it helps? Thanks.

Multi-session template is just useful for specific indicators that do not use the trade data of the entire day. For example, if you wish to disply the high and low of the regular session, then it may help to isolate the regular session on the chart in order to perform the calculations.

It is not necessary to use such charts, but is only required for a subclass of indicators.

It also helps if you wish to see the regular close on a tick based charts, as the session break lines typically truncate the tick bars such that they align to the session breaks.

Reply With Quote
The following 2 users say Thank You to Fat Tails for this post:
(login for full post details)
  #7 (permalink)
canoekoh
Chicago, IL
 
Posts: 70 since May 2018
Thanks Given: 56
Thanks Received: 98


Fat Tails View Post
Multi-session template is just useful for specific indicators that do not use the trade data of the entire day. For example, if you wish to disply the high and low of the regular session, then it may help to isolate the regular session on the chart in order to perform the calculations.

It is not necessary to use such charts, but is only required for a subclass of indicators.

It also helps if you wish to see the regular close on a tick based charts, as the session break lines typically truncate the tick bars such that they align to the session breaks.


Fat Tails View Post
A futures contract has an expiry date. When you roll to a new contract, the new contract has a different expiry date. The current price of a futures contract depends on the price expectation at expiry and interest rate levels. As a result there will be a gap.

Whether you use non-adjusted or backadjusted continuous charts, depends on the methods or indicators that you use. In general a backadjusted chart as a lot of advantages over a non-adjusted chart. For example,

- 90% of all indicators will only work correctly with backadjustd charts
- backtests will show correct results with backadjusted charts but need to be corrected for non-adjusted charts

You should not care about incorrect prices, unless your trading decisions depend on actual prices.

The gap depends on the selected roll date and the time of day. It is important to calculate the gap at a moment when the market is liquid.

Example: By default NinjaTrader 7 uses the last traded price of the regular session (last second of the settlement period). This leads to reasonable offsets and correct gaps.

By default NinjaTrader 8 uses the last traded price of the trading day. This is an inacceptable approach as the markets are typically illiquid during that time. The resulting gaps are erroneous and you need to correct them manually, by selecting a different roll day and a different offset. That approach does not make sense.

In the end it is your responsibility to select a proper offset and configure your trading software accordingly.



This is as expected. The prices are NOT expected to get closer to each other, but typically the differential between the two contracts is maintained. This is how futures markets work. Price expectations depends on expected supply & demand and interest rates. Expected supply & demand is different on expiry dates for the old and new front month contract.



I would never touch CFDs. Those are private contracts where you trade against the dealer that sets the prices. The CFD prices are probably calculated by redistributing the gap over 21 business days and splicing the two contracts together. Think of it as a gap which is divided into little slices which is inserted over the entire month to compensate for the different expiry dates of the underlying futures contract.

hey thank you for the detailed guidance. your response really helped me make sense of a lot of things i was confused on. good to have people like you around.

Reply With Quote
The following user says Thank You to canoekoh for this post:
(login for full post details)
  #8 (permalink)
 
trendisyourfriend's Avatar
 trendisyourfriend 
Quebec Canada
Legendary Market Wizard
 
Experience: Intermediate
Platform: NinjaTrader
Broker: AMP/CQG
Trading: ES, NQ, YM
Posts: 4,524 since Oct 2009
Thanks Given: 4,164
Thanks Received: 6,008


Fat Tails View Post
...

By default NinjaTrader 8 uses the last traded price of the trading day. This is an inacceptable approach as the markets are typically illiquid during that time. The resulting gaps are erroneous and you need to correct them manually, by selecting a different roll day and a different offset. That approach does not make sense.

...

If you do manually correct them then if Ninja misbehaves at some point in the future and you need to reset your DB you'll lose all the corrected datas. You could re-apply the initial corrections but who has the time to do this?

Reply With Quote
(login for full post details)
  #9 (permalink)
 
Fat Tails's Avatar
 Fat Tails 
Berlin, Europe
Market Wizard
 
Experience: Advanced
Platform: NinjaTrader, MultiCharts
Broker: Interactive Brokers
Trading: Keyboard
Posts: 9,888 since Mar 2010
Thanks Given: 4,242
Thanks Received: 27,098


trendisyourfriend View Post
If you do manually correct them then if Ninja misbehaves at some point in the future and you need to reset your DB you'll lose all the corrected datas. You could re-apply the initial corrections but who has the time to do this?


Resetting the DB should not affect it.

However, when you reinstall NT you will have this problem.

Reply With Quote
(login for full post details)
  #10 (permalink)
 
muttoez's Avatar
 muttoez 
Sydney + Australia
 
Experience: Advanced
Platform: CSI / Sierra Chart
Broker: IB
Trading: Everything
Posts: 505 since Mar 2016
Thanks Given: 63
Thanks Received: 313


This is the most detailed article I have read on the issue.

https://www.linkedin.com/pulse/should-futures-charts-spread-adjusted-contract-opinion-jack-schwager

Follow me on Twitter Visit my NexusFi Trade Journal Reply With Quote
The following user says Thank You to muttoez for this post:





Last Updated on July 4, 2018


© 2024 NexusFi™, s.a., All Rights Reserved.
Av Ricardo J. Alfaro, Century Tower, Panama City, Panama, Ph: +507 833-9432 (Panama and Intl), +1 888-312-3001 (USA and Canada)
All information is for educational use only and is not investment advice. There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
About Us - Contact Us - Site Rules, Acceptable Use, and Terms and Conditions - Privacy Policy - Downloads - Top
no new posts