Which Eurodollar contracts to trade?

[Adamus]

I am putting together a trading algorithm for end-of-day trading and I'm back-testing it on several markets, and I want to back-test it on Eurodollars too.

It's a fairly simple algorithm which uses indicators like average true range, directional movement index etc, and all trades are closed out on close same day, so there's no long term holding of positions.

I am putting together a continuous data history for it, and with Eurodollars having a contract in every month, I'm spoilt for choice compared to TBonds or currency futures. Should I use every month for the history, or stick with H,M,U and Z? They all seem to have huge liquidity, but I wonder whether price action will vary.

Also a big question: should I use the spot month or the 2nd or 3rd or further out?

Lastly when would you roll over out of a contract?

Any advice on any of these would be massively welcome.

 

[Rhody Trader]

Firstly, H/M/U/Z is the contract cycle to focus on, as you seem to have observed.

Secondly, the contract considered the "front" contract is generally the second contract out. Sometimes, depending on market developments and the timing of things, it's the 3rd. You'll be pretty safe, though, always using the second and rolling quarterly.

 

[Adamus]

Looking over the data I see for example 2007-07-25 is the last day of a quiet period and the next day is a monster. Here are the high to low ranges:

                           Contract:

 Date                  07Q            07U            07V             07X

2007-07-25       0.0050       0.0100       0.0150       0.0250
2007-07-26       0.0575       0.0550       0.0600       0.1300

Volume:

2007-07-25           795       123820          203         0
2007-07-26         2461       605313          257         0

 

[Adamus]

OK, I'm glad you said that, it fits with what the volume and OI look like, comparing across contracts. Thanks.