Continuous Contract
A continuous contract is a synthetic price series created by stitching together successive futures contracts as they expire, producing an unbroken historical chart. It is used for backtesting and long-term technical analysis.
A continuous contract (also called a perpetual or back-adjusted contract) is an artificial price series constructed by connecting individual futures contracts end-to-end as each one expires and the next becomes the front month. Since individual futures contracts have a fixed lifespan, continuous contracts solve the problem of limited price history for analysis and backtesting.
Why it is needed
Each futures contract has a specific expiry date. An ES March contract and an ES June contract are technically different instruments. Without stitching them together, the longest chart you can view is a few months: far too short for meaningful technical analysis or strategy testing.
How continuous contracts are built
There are several methods, each with trade-offs:
Back-adjusted (ratio or difference adjustment): the most common method. When rolling, the historical data is adjusted backward so there is no artificial gap at the roll point. This produces a smooth chart but means historical prices are not the actual traded prices of any specific contract.
Unadjusted (nearest contract): simply concatenates contracts without adjustment. Rollover gaps appear as visible price jumps on the chart. Useful when you need actual historical traded prices, but misleading for visual analysis.
Forward-adjusted: adjusts future data rather than historical. Less common.
Implication for backtesting
If you backtest on a back-adjusted continuous contract, your strategy may show entries and exits at prices that never actually traded on any real contract. This is an important caveat: especially for strategies that trade near key price levels.
Platform terminology
| Platform | Continuous contract notation |
|---|---|
| TradingView | ES1! (front month), ES2! (second month) |
| Sierra Chart | @ES (auto-roll) |
| NinjaTrader | ES 03-25 (specific contract) or @ES (continuous) |
Most charting platforms offer both specific contract charts and continuous charts. For day trading, you typically trade the active front-month contract. For analysis, you use the continuous chart.