Some additional rules to add to your managed futures price series data validation protocol.
As part of my procedure for back-testing, I validate the data before using it. One of the validation steps is to check for unusually large daily changes in the raw close. Here I explore the extreme value distribution and its role in data validation protocols for systematic trading system design.
Even the best commercially available data contains errors. You must have a data validation protocol to help you find and remove them. Remeber your analysis is only as good as your data!
Creating good data series for back-testing is critical for effective trading system design. In this post, I discuss the advantages of ratio-based continuous contracts.