Futures What price is charted ?

[*JDR*]

This may sound like a silly question, but I need to ask it anyway.

When trading futures (lets say for example a commodity) contracts. What charts are used for TA?

Is it the spot price or is it a futures price?

Due to the convergence of the prices as they get closer to the contract date, I don't understand how the futures price is charted, especially since there are contracts available with different timframes, at the same time.

I imagine there could also be a difference depending if I trade short or long term.

Thanks.

 

[Jack o'Clubs]

Use the contract month you're most likely to trade depending on your general holding period, bearing in mind liquidity drops off considerably the further out you go. In practice this means trading/charting the current period, although in December, you'd probably start looking at March expiries. It can get a bit more complicated than that, for example cereal commodities, where contracts can fall into different harvests and hence the fundamentals can change.

Beware using charts that present 'spot' data unless you know how it's been calculated - is it spliced or back-adjusted, and how that is likely to impact on your TA.