You pull up five years of crude on the commodity screen and find something unusually clean: a level that has been touched four times across three years and held every time. You mark it, size a trade against it, and then — out of habit rather than suspicion — you check what the price was on one of those dates in a news archive. It does not match. It is out by a few hundred rupees, and the gap is different on each of the four dates. Nothing is wrong with the data. The chart you were reading is not the price history of anything. It is dozens of expired contracts glued together by an arithmetic rule, and the rule moved every one of those old prices.
A family measures each child’s height against the same doorframe. Each child leaves home at fifteen and the next one starts from wherever they can reach, so the marks form four separate ladders on one piece of wood. Somebody who wants a single rising line rubs out the gaps and slides each ladder up until it joins the one before. The resulting line rises beautifully and is a fair record of how fast children grow. It is not a record of how tall anybody ever was.
A continuous contract — the long futures chart your platform draws — is that wall. Each contract lives for a few weeks or months and dies. To make one line out of them, a rule slides the older segments up or down until they join. The shape survives the operation. The levels do not.
Why the problem exists at all
A share has one continuous life. The same instrument that traded in 2019 is trading today, with the same ISIN and the same order book, so a long chart is a genuine record with only corporate actions to adjust for. A futures contract has no such life. The near-month contract you are watching today was not the one being watched a year ago and will not exist a few weeks from now; it is one member of a family of separate instruments, listed some way in advance and expiring in turn, each with its own order book, its own open interest and its own price. That price differs from the next month’s by the cost of carry — financing, storage where the underlying is physical, and whatever the market thinks of holding it until that date. There is nothing to plot continuously, so a vendor manufactures continuity.
| Splice method | What it does | What it preserves | What it destroys |
|---|---|---|---|
| Raw splice, sometimes called unadjusted | Simply switches from one contract’s prices to the next on the roll date, leaving the gap in place | Every price is a price somebody actually paid on that day | Continuity. The chart shows a jump at each roll that no trader experienced, and any indicator with a lookback reads it as a real move |
| Back-adjusted, by difference | Shifts the whole earlier history up or down by the rupee gap at each roll, cumulatively | Point-for-point moves, so a rupee stop measured on old data is comparable | Absolute levels. Old prices are no longer prices — where each new contract is persistently dearer than the one expiring the earlier history is pushed up, and where it is persistently cheaper the cumulative downward shift can take the adjusted history below zero |
| Ratio-adjusted, by proportion | Multiplies the earlier history by the ratio between the two contracts at each roll | Percentage moves, which is what percentage-based indicators need | Absolute levels again, and rupee distances — a ₹20 range five years ago is drawn as something other than ₹20 |
The second choice nobody is told about: when to roll
Before a platform can adjust anything it has to decide the day on which one contract stops being the chart and the next one starts. There is no standard, and three rules are in common use. Rolling on the expiry date itself keeps the near contract for as long as it exists, and drags the chart through the illiquid, distorted final sessions. Rolling a fixed number of days before expiry avoids that and picks an arbitrary date. Rolling when volume or open interest migrates to the next contract follows where the market actually is, and produces a roll method whose dates move around from month to month.
- The roll date changes the data, not just the join. Different roll dates mean different sessions are included from each contract, so two platforms using the same adjustment method will still show you different candles.
- Expiry dates themselves are not fixed furniture. The Indian exchanges have moved expiry days for various contract families more than once, and the schedule is a published calendar rather than a constant. A backtest that hard-codes a weekday is encoding a rule that has already changed.
- The final sessions of an expiring contract are the least representative ones. Liquidity has already left for the next month, spreads widen, and prices are pulled by settlement mechanics. A chart that rolls late inherits all of that as though it were price action.
- Volume on a continuous chart is spliced too. As a roll approaches, turnover splits across two contracts. Depending on the method your chart may show a volume collapse that is only migration, and a volume-confirmation rule will read it as a failing move.
What to actually do
- 1Find out what your platform is doing
The adjustment method and the roll rule are usually settings on the symbol rather than hidden, and vendors default differently. Write down what yours is doing once. You cannot reason about a chart whose construction you do not know.
- 2Use the continuous chart for shape and the live contract for levels
Trend, regime, volatility estimates and structure are best read on the long spliced series. Support, resistance, entry, stop and target belong on the chart of the contract you will actually place an order in — the instrument whose order book your order joins.
- 3Express levels as distances, not as numbers, when they must span a roll
A stop “₹80 below entry” or “one and a half times the recent average range” survives a roll intact. A stop at ₹5,200 does not, and will silently mean something different next month.
- 4Test rules on the series you will trade
A rule that refers to absolute price levels should be tested contract by contract. A rule that refers to returns and distances can be tested on a ratio-adjusted or back-adjusted series respectively — matching the adjustment to the kind of arithmetic the rule uses.
- 5Treat the roll as a real event in your record-keeping
If you carry a position across a roll you close one instrument and open another, paying the spread and the costs twice. That is a genuine cost of the strategy and it belongs in the backtest, not in the footnotes.
You mark a support level at ₹5,200 on a five-year back-adjusted commodity chart. What is that number?
Ghar ki deewar pe har bachche ki height ke nishaan hain, par har bachcha pandrah saal mein chala gaya aur agle ne neeche se shuru kiya — chaar alag seedhiyaan. Kisi ne ek seedhi line banane ke liye har purani seedhi ko khisak kar joda diya. Line sahi hai, par ab koi bhi nishaan kisi ki asli height nahi hai. Paanch saal ka futures chart bilkul yahi hai — dozen expire ho chuke contracts ko jodkar banaya gaya. Uska aakaar bharosemand hai; uska ₹5,200 wala support kisi ne kabhi diya hi nahi.
- A futures contract has a short life, so a long chart is spliced from many separate instruments.
- Raw splices keep real prices and add false gaps; adjusted series remove the gaps and stop being prices.
- Back-adjustment preserves rupee distances, ratio adjustment preserves percentages, neither preserves levels.
- The roll rule is a second, undisclosed choice that changes which candles you see at all.
- Read shape on the continuous chart and place orders against levels on the contract you will trade.
Mark it done to track your progress through the curriculum.
Common questions
Short, direct answers to what people ask about this topic.
- continuous contract meaning in futures charts
- A continuous contract is the long futures chart a platform manufactures by splicing many separate expired contracts end to end, because no single futures contract lives long enough to draw years of history. Each of those contracts had its own order book, its own open interest and its own price, and a rule slides the older segments up or down until they join into one line. The shape of the resulting series is real; the individual historical levels are a product of the construction.
- a futures chart made by joining successive expired contracts into one series is known as a
- A continuous contract, also described as a spliced or stitched futures chart. Vendors build one because a futures contract expires within weeks or months, so there is no single instrument whose price history spans years. The join is made on a chosen roll date using one of three arithmetic rules — a raw splice, a back-adjustment by difference, or a ratio adjustment by proportion.
- why does the price on my old futures chart not match what it actually was
- Because the chart is almost certainly back-adjusted or ratio-adjusted. At every roll the vendor shifts the entire earlier history by the gap between the expiring contract and the next one, so a price from two years ago has been moved by every roll that has happened since — including rolls that occurred after the date you are pointing at. Only a raw, unadjusted splice keeps prices somebody actually paid, and that version shows a jump at each roll instead.
- difference between back-adjusted and ratio-adjusted futures charts
- Back-adjustment shifts the earlier history by the rupee gap at each roll, so point-for-point moves and rupee stop distances stay comparable; ratio adjustment multiplies the earlier history by the ratio between the two contracts, so percentage moves stay comparable. Neither preserves absolute levels. In a market that persistently carries, the cumulative back-adjustment can even push the adjusted history below zero, and a ratio-adjusted chart redraws a ₹20 range from five years ago as some other number of rupees.
- when does a continuous futures chart switch to the next contract
- On the roll date, which is a platform setting rather than a market fact. Three rules are in common use: rolling on the expiry day itself, rolling a fixed number of days before expiry, or rolling when volume and open interest migrate to the next month. Different roll dates pull in different sessions from each contract, so two platforms using the same adjustment method will still draw you different candles.