activity resulting from unrelated objectives ofits participants, much like the undercurrent of constant talking at larger and smaller meetings. A pension fund adds to its positions becauseof new investment capital; a corporation liquidates a stock portfolio toinvest in a shopping center, or a family withdraws from a mutual fundto pay medical bills. Much of the price movement has little to do witheconomic trends or clever timing of entry and exit points.
The Impact of Change on Markets and Trading
13
New or emerging markets do not have this broad participation; therefore, the level of noise is not nearly as high. That makes it easier to tradea simple trend-following system profitably. Table 1-1 and Box 1-4 compare more and less mature markets. They show that it is easier to tradea newer market with a simple system, and just as impossible to use thatsame approach for a broadly traded, mature market.Comparing New andMature MarketsResults show that the newest, active world markets, the Hong KongHang Seng Index and MATIF's CAC-40 are still very profitable for alltrend speeds tested. The Hang Seng has a higher annualized return forfaster trends, indicating that short-term price swings are sustained witha relatively low level of noise, even though the longer term trend didnot develop as well. Had the noise been greater, the trend would havereversed frequently, causing whipsaw losses.The CAC-40 shows a drop of about 50 percent in trend returns for themost recent five years compared with the earlier period. It also postedlarger profits in faster trading for the earlier period but has evolved to amore uniform distribution as the market matured. There is now only aslightly declining pattern in the rate of return as you move from theshortest 5-day trend speed to the longest 75-day period.The Deutsche mark, along with other major currencies, has alwaysbeen actively traded. In the past five years, however, Deutsche markactivity has increased as the mark assumed a dominant role in theEuropean economic structure, combined with greater world tradingactivity. The first five years, 1983-1987, show greater profits and a tendency toward longer term trends than the more recent years. Both periods show that the fastest trends are the most difficult, the likely resultof short-term volatility, frequent price shocks, and intense competitionin active Forex trading. The "optimum" trend may vary based on longterm economic shifts, confidence in the European Community, and theability of the United States to compete in trade. As the foreign exchangemarkets continue to mature, the ability to produce trending profits withfaster trading should decline.IBM is shown for only the first five-year period, to allow you to study itschange. With the exception of the 5-day trend, it shows a clear increase inprofits as a longer-term position is taken. With transaction costs included,the smaller profits posted in the 15- to 45-day trends are likely to disappear. The profit of 18 percent for the 5-day trend may seem unusual butwould have presented a window of opportunity for some small investors.
Box 1-4. THE ABILITY TO PROFIT FROMA TREND-FOLLOWING SYSTEMChanges in price patterns as markets mature can be illustrated with asimple trend-following system. It shows that newer or emerging markets have clear trends. As they mature, the increased participationincreases noise and makes the price patterns more complex. Ordersentering continually, for different reasons, obscure the trend.Table 1-1 shows the results of a simple trend-following system tested for a selection of markets. The system uses the following rules:1. An exponential moving average determined the trend.2. Buy when today's exponential trend value turns up.3. Sell when today's exponential trend value turns down.4. The system is always in the market.5. No transaction costs were charged.Table 1-1. Comparison of Trend PerformanceExpMADays
HangSeng19881993
CAC-401983198819871992
D-Mark1983198819871992
IBM19821987
19831987
19881992
CrudeOilDec1992
515253545556575
22.317.512.19.88.711.711.118.0
40.533.132.830.029.128.527.727.8
16.620.719.919.710.813.518.313.5
5.79.76.79.38.59.311.711.2
1.34.97.46.29.36.35.85.8
18.04.04.36.98.611.711.118.0
(47.5)(22.3)(22.7)(18.9)(12.9)(0.7)0.8(0.7)
(36.2)(26.8)(16.1)(14.9)(14.4)(8.7)(6.6)(11.6)
(0.17)0.27(0.41)(0.43)(0.91)(1.19)(0.85)(0.17)
Avg
10.4
31.2
16.6
9.0
6.2
10.3
(15.6)
(16.9)
(0.48)
Dow
Results show1. The most mature market, the Dow, cannot be traded using anytrend within the tested range.2. Developing markets, such as the Hang Seng and CAC-40 (from1983 to 1987) show characteristic short-term trends. As theymature, they begin to show greater profits in long-term trends,rather than short-term.3. The D-mark is a deep market, as are all the other major currencies, and shows a tendency toward declining, smaller profits.4. IBM shows long-term trends with the exception of a small opportunity window for the 5-day trend, which is difficult to trade.5. Crude oil volatility, the result of large commercial dominanceand attempted OPEC manipulation, overwhelms the price trend.
14
The Impact of Change on Markets and Trading
15
We might assume that institutions cannot trade a short-term trendbecause they cannot trade a large enough position and tend to move themarket too far for the expected profit. Small, independent traders can takeadvantage of this slot only if their commissions and other transactioncosts are low. A 5-day trend may have traded as much as once each week.With commissions at V2 percent, an 18 percent profit becomes an 8 percentloss for the year.The Dow represents the most mature market. The large losses at nearly every trend speed indicates that the daily market volatility is veryhigh compared with the net movement of stock prices. Mature marketshave broad participation, representing traders with diverse interests.Constant institutional buying and selling to fill portfolios, or speculative liquidation to invest in real estate or other assets, adds a high levelof noise to the daily activity. As other world markets mature, theyshould follow the pattern of the Dow.The last example looks at a single futures contract of NYMEX crude oil.It also shows losses in nearly every trend period. But crude oil is not asmuch a mature market as it is a manipulated one. Attempts by OPEC tolimit production cause sharp moves and discourage small, individualtraders from participating. The cash and futures markets, dominated byvery large commercials, are used to buy and sell cargoes for delivery andhedging. This combination—attempted price controls and traders withlarge orders and deep pockets—adds volatility that overwhelms the trend.
Structural Change: SeasonalityCan you make the same type of trading decisions today as you could in1960? No. Many of the markets with the greatest volume form a relativelynew "derivatives" group. Foreign exchange futures, options on futures,stock index futures of all types in many countries, and short- and longterm interest rates, including the European Currency Unit or ECU (whichis more a concept than a hard currency that you could use to pay a lunchbill) are all very different from the markets only 10 years ago.Even agricultural markets, the oldest of the exchange-traded commodities, have changed. Crops are still planted and harvested according to their season, but the seasonal price patterns that survived for centuries are no longer dependable. In the 1980s, U.S. grain prices rosewith surplus production, confusing traders and delighting farmers.Afterward, the phenomenon was recognized as "parity," the ability of afreely traded product to hold a constant world value. As the U.S. dollardeclined, U.S. grain became more attractive to non-U.S. buyers, causingexport demand and price to rise.
16
How Changing Markets and Technology Affect Results
It seems odd to think that the normal seasonal patterns have alsochanged. Beginning in the mid-1970s, farmers built more storage facilities. Before there was adequate storage, farmers needed to forwardprice their production with a local grain elevator or be subject to sellingeverything that couldn't be stored at harvest. They could rent storagespace, but only if they booked in advance and paid a minimum 3-monthfee. On-farm storage relieved the pressure on harvest prices and farmers could recoup their cost by adding carrying charges to the crop priceeach month after harvest. With 100 percent storage, it is possible toeliminate the price drop at harvest.With their own storage facilities, carrying charges become "soft dollars" to the farmers. When crops were stored in a rented space, farmerspaid out-of-pocket costs to elevator operators. On-farm storage is similar to price "bundling"; it is harder to distinguish the cost of the parts,and the total price becomes more flexible.Orange juice presents two more seasonal wrinkles. Crop freezes are nolonger devastating to consumers. Prices may jump sharply when temperatures hold under freezing in central Florida, but not for long. For thepast few years, Brazil has been anxious to fill the gap in U.S. supply, andconsumers are equally agreeable to paying lower prices at the expense ofdomestic U.S. growers. Because the government bowed to the pressureand permitted juice to be imported from tremendous Brazilian reserves,what will happen the next time there is a freeze? Do prices jump on asharp reduction in supply, or will traders anticipate a fast substitution ofBrazilian product? In either case, the seasonal pattern is disrupted.The second twist is the result of the opposite North American-SouthAmerican crop years. Orange juice, soybeans, and eventually other cropscan be produced in quantity in the opposite season. When the U.S. farmersare harvesting in the fall, Brazilian farmers are planting in the spring. Justwhen carryover stores are dwindling, crops from the other hemisphere arebeing harvested. When U.S. crop production is not good, SouthernHemisphere stocks and plantings can be abundant. The world import market is fungible. If the Russians need grain, they will go to the best price, notjust to the U.S. market. What does this do to the seasonal patterns? Itmakes supply and demand a global concept, and far less predictable.
The Evolution of MarketsThis is not just an agricultural phenomenon. It is no secret that financialmarkets have been globalized. These effects are permanent. Even if governments change and exchanges disappear, the United States will neveragain be the only center of activity. Undoubtedly, the People's Republic
The Impact of Change on Markets and Trading
17
of China (PRO and Russia will play an increasing role in world trade.Despite the PRC's apparent resistance to political change, it has shownan aversion to cutting off its Hong Kong arm. Regardless of inconsistency, China—with a quarter of the world population—wants to enterinto world trade more actively. Russia has already made it clear that itwants a market economy. The effects on supply-and-demand equilibrium will be enormous. If the transition is fast, the imbalance will provideshort-term opportunities in business and speculation that are unprecedented. Either way, the future will not look the same as the past.
2Assessing MarketRealityTrading looks easier than it is. Think of how clear the trends and patterns seem on an old chart of the DOW, or gold, or bonds. The recession that started in 1990-1991 was severe and prolonged, and it causedbond prices to move steadily higher for three years. It is perfectly clearthat interest rates could do nothing other than decline. But how many"traders" just held bonds rather than bought and sold throughout thewhole period? Not many. Whether people are trading stocks or sellingcrops, they usually buy and sell when they are forced to, or when theycan no longer stand the stress of holding the position.Change is difficult. We tend to be resistant, slow to recognizechange, and often slower to react. Awareness of change often comeswhen it becomes obvious that the old way doesn't work anymore.Only then do we look for new solutions. This chapter looks at changesin the market structure, its participants, and in the way we use thenew tools. Recognizing the problems can be a convincing argument forchanging some of your trading methods.
The Screen Is HistoryPrices that appear on the quote screen are already part of history. In afast futures market, the price you see may have traded 5 minutes ago. Atany time, the market is more likely to be trading at a price that is different from the one you see on the screen. The screen shows where the pricetraded last, not where it's going to trade next. When execution timing iscritical, you cannot wait for a screen price. The screen is not the market.It lags the market in the same way a trend lags actual price movement.19
20
How Changing Markets and Technology Affect Results
That's not to say that you always get a poor execution price. Thereare those times when, because you were too slow, you got in at a better price later. But they are exceptions. Even when you can make theentry gracefully, exiting a trade can be a rushed event. Use of spontaneous judgment only gives you the opportunity to delay the exit, holdonto that losing trade, and wait for a worse price to come along.The screen is a poor substitute for a resting order, which gets executed immediately. Unfortunately, Stops and Limit orders only work forsmall lots. However, anticipating a trade, whether a computerized orintuitive system, will improve the ability to get a target price for smaller, individual traders as well as institutions. The importance of anticipation will be discussed later in this chapter.Nonexistent Spread ProfitsDuring the trading day, screens often show prices within a single market, such as crude oil, that appear out of line. Or, a part of the yieldcurve, such as the 10-year note, may be too high with regard to the 5and 20-year instruments. Box 2-1 shows the prices as they mightappear at midday, with the November quote clearly out of line withrespect to other delivery months.If you try to spread those markets, to profit by selling the apparentdistortion, you find that the bid-asked is perfectly in line with theother months, although the screen price only reflects the last trade.The price was higher or lower on the screen simply because one forward month had not traded while activity in the neighboring deliverymonths had moved those prices lower.In general, spreads that are constructed by matching two separateprice series will suffer the same problem. The traded spread price isnot often saved as historic data because it seems easy enough to createa spread once you have the prices for each of the components. It simply involves getting the prices at the same time.Frequently, two markets do not trade at exactly the same time. Thespread will appear to move in and out based entirely on one markettrading while the other remains quiet. This is especially the case for anearby versus deferred delivery of the same futures market. In reality,the spread price (the difference between the two months) may haveremained unchanged during the entire time.Closing PricesIt is more common to use the closing prices to generate a spread. Forfinancial markets that close at the same time, these prices can be reason-
Assessing Market Reality
21
able, if you consider the slightly higher transaction costs of executing aspread. However, creating a spread from the closing prices of two markets that did not close at the same time (and at the same exchange) creates an unrealistic spread price. If you trade only the IMM (InternationalMonetary Market) currencies and the Swiss franc closes 5 minutes afterthe Deutsche mark, then the spread may appear to widen or narrowduring those 5 minutes. The Deutsche mark will remain aligned withthe Swiss franc in the cash market, and open the next day at the spreadprice that existed 5 minutes before the Swiss closed, when both markets
22
How Changing Markets and Technology Affect Results
were open. A trading signal based on prices quoted at different timescould easily have been an error.
Execution Problemsand PerformanceBrokerage fees are often only a small part of transaction costs. Slippage,the difference between the price you wanted and the price you got, is acostly component in trading. This ignores the fact that some tradesdon't get filled at all. Unables, the trades that don't get executed, arethe biggest problem and the greatest cost for large traders.You can get filled on any trade if you must be in or out of the market. By placing an order "at the market," it will be filled; or, you cantake the bid or asked price in the cash market, regardless of theamount. But most traders won't take any price; systematic trading generally requires a price relatively close to the signal or target price toproduce profits."Unables"Unables are usually orders that were canceled because the marketmoved too fast and too far. This applies to entering new positionsmuch more than getting out of existing ones. Entering a positionallows more selectivity; exiting a trade always seems to be an urgentmatter.Experience shows that a fast trend-following or breakout system canmiss nearly all profitable trades under poor market conditions, and upto 30 percent of all profitable trades during a volatile 1-month period.Intraday breakout systems show the typical problems. Buying abreakout that occurs during the trading day may not be possible.When government reports are released just after the opening of theU.S. financial markets, prices can leap to new levels. Only a few contracts in total may be executed during the price move that lasts only afew seconds. You can't expect to be filled by being fast or using a Stoporder. You can only buy the top or not buy at all.An individual with a small order may be pleasantly surprised oncein a while, by getting an execution somewhere before the marketreaches its extreme. If you trade larger lots, say 100 or more futurescontracts, and limit the slippage that you will accept (by using Limitorders or waiting for a specific price level), expect that 5 percent to 30percent of your trading volume won't be filled over the long term.Many times all of an order will be filled, other times very little.
Assessing Market Reality
23
Who Is Likely to HaveExecution Problems?Not all traders have difficulty getting fills. The worst performancecomes from a combination of five features:1. High-volume traders, such as fund managers and institutions. Largeorders mean pushing the price, especially if you are exiting a position. It means that it may take from 10 minutes to 3 days to executean order. It's difficult to get a specific price under those conditions.2. Short-term traders, holding positions for less than two days. Fast tradingkeeps both profits and losses small. Slippage can take a large percentage from profits, in addition to increasing the size of each loss.3. Trend-followers, buying and selling in the direction of the price move.Buying when the market is rising always results in sizable slippage, and occasionally an unpleasant surprise when prices jump.Good news is rare.4. Intraday traders, executing orders between the open and close. Volumedrops sharply between the open and close of an exchange tradingsession, and between traditional business hours in interbank markets. It is not always easy to find someone to take the trade, or thebid-asked moves to an unacceptable spread.5. Traders who use limit orders, such as "Or Better." Rather than using"At the Market orders," professionals try to execute at a price. Theycan find themselves chasing the market more often than theyexpect. At some point, the price becomes unacceptable.An institutional trader, such as a fund, using a short-term breakoutsystem (considered to be trend-following) in which signals occur atany time during the day, would have the largest slippage and the mostunables. Few traders and methods are immune from unables.Only the Profits Don't Get PilledIt is easy to see that the unfilled positions would have all been profits.If prices had reversed after a breakout or trend signal, there wouldhave been an opportunity to enter the whole trade. Therefore, it is theprofitable move—where prices keep going (or pull back only a smallamount)—that does not get executed. The losing trades are alwaysfilled and you miss only the winners.Can you make money trading a system where 5 percent to 30 percent of the profitable positions aren't filled or when you must excecutein a fast market? Box 2-2 shows that a single unexpected price jump
24
How Changing Markets and Technology Affect Results
Box 2-2. THE IMPACT OF SLIPPAGEExample 1: Impact of normal slippageA trend-following program has an average profit of $500, an average loss of $150, and is profitable 40 percent of the time, netting anaverage combined profit of $110 per trade after commissions, without slippage. Trades in the Deutsche mark, entered as Stop orders,are typically filled 4 pips from the signal price, but no less than 2pips. For a Chicago International Monetary Market contract, tradedin 8ths of a million, that means a cost of no less than $25, but normally at least $50 of added cost for each entry and exit. That leavesonly $10 per trade as an expected profit!Example 2: Impact of slippage in a fast marketThe importance of slippage can be reduced by increasing the expectedprofits per trade. Using a slower trend-following approach, with larger profits and fewer trades, the program produces the same $500average profits, $150 losses, and a 40 percent reliability, but this timenet of both fees and normal slippage.When the IMM Deutsche mark opens at 7:20 A.M. in Chicago, theprice is at 58.10. The trend-following system has a buy Stop entered for20 lots at 58.25. At 7:30, the U.S. Balance of Trade is released, showinga deficit of $12 billion, unchanged from the previous month, but $4billion worse than expected. The fills come back from the floor: 2 at58.30, 5 at 58.60, and 13 at 58.75, averaging 58.667. The total slippageis US$521 per contract. If this program has one trade per week, theexpected returns would be:21 Profits @ $500 =31 Losses @ $150 =52 Trades total
$10,500(4,650)$5,850
A single added loss of $521 is 9 percent of the annual returns.
could cost nearly 10 percent of the expected yearly profits. If you donot plan for execution problems during development, most programswill not survive.Improving ResultsThe three ways of reducing the unpleasant effects of unables and slippage are to seek larger profits per trade, use realistic transaction costs
Assessing Market Reality
25
in testing, and anticipate the trading signal (anticipation is discussedin Chapter 11). Larger profits can be accomplished in the followingways:• Holding long-term positions. Trading only one to three times peryear, with large expected profits, reduces the importance of slippage and allows a longer time to enter and exit a trade. An averageprice or a specific entry strategy can work well.• Targeting larger profits per trade. When using a faster tradingmethod, which is a necessity for many foreign exchange operations,profits per trade can be increased by selecting more volatile marketsor by including a profit-taking strategy. Profit taking will improvethe overall profile of a system and will contribute significantly toreducing slippage.Test CriteriaThe use of a realistic execution price when simulating a trading strategy can resolve all slippage and profitability problems. You cannotknow if a strategy will be profitable unless you assign correct entryand exit prices. The following procedures are advisable:• Approximate "normal" slippage. Box 2-3 shows that fill prices arebased on a number of factors. The net transaction cost is difficult todetermine in advance. A "worst-case scenario" may be too extreme,but something less than an optimistic approach is best.• Estimate fills for intraday trading. It is safe to assume that you get theworst price during the 5-15 minutes following your order. Thatmeans taking the worst high or low during the interval, not just theprice at the end of the period.• Test for "locked-limit" moves in futures markets. In most cases, youcan't buy if the closing price equals the high of the day; you can'tsell if the close equals the low of the day. The exchange system ofsettlement, based on an average of the last one minute of trading,makes it unlikely that the close will settle at the high or low. Ofcourse, when the high and low are the same, no trading occurred.The best estimate comes from monitoring a system that is actuallytraded, as discussed in Chapter 11. Unfortunately, that does not helpat the early stages of development. Previous experience will allow youto estimate the transaction costs for trend-following and other programs, even though those strategies are not identical to the currentsystem.
26
How Changing Markets and Technology Affect Results
Box 2-3. GUIDELINES FOR CALCULATINGSLIPPAGEThe following guidelines are for buy orders:Small Orders
Large Orders
Variable slippage. Add a percentageof the high-low range to the fill price,e.g., Price ± .15 X (High - Low)
15% above the systemsignal price
15% above the averageof the executioninterval price
Minimum slippage. Each market isassigned a minimum slippage that islarger than the normal bid-askedspread. For IMM Japanese yen orDeutsche marks, the spread is 8 pips,or US$50. For the S&P, it is often 20ticks, or US$100. Use the minimumslippage if it is greater than the variableslippage.
For trend following:(Ask-Bid) X 1.5
(Ask-Bid) X 3.0
Countertrend orders:(Ask-Bid) x 1.0
(Ask-Bid) x 2.0
Orders on the Open or Close. Ordersexecuted in the opening or closingrange receive the worst price of therange.
Worst of the openingor closing range
Worst of therange X 15
Maximum volume. Assume that an order will not be entirelyfilled, at any price, if it exceeds 5 percent of the daily volume.Screen trading execution lag. If Stop orders are not used, tradersmust assume that prices have moved past their price by the timethat price appears on the screen. At best, the screen shows the bidprice. The calculations above assume that the time to call the broker, quote the price, and place one or more orders results in larger slippage.Small lot Stop orders. Small orders placed as Stops are usuallyfilled at prices showing slippage greater than you would expectfrom the bid-asked spread. You. often pay a premium for tradingsmall.
Globalization:Simultaneous AbsorptionThe Nikkei drops 700 points, and the S&P opens 200 lower. TheBundesbank raises the rate on the bund by a half-point, and U.S.bonds drop. The old theories of isolationism no longer exist. Economicevents in one financial center affect financial markets everywhere with
Assessing Market Reality
27
nearly instant reactions. As Great Britain struggles with its economy,its equity market fails to react to rate changes by the Bank of England.Instead, it is pulled by the more influential trading partners in theEuropean Monetary System.Portfolio diversification is more difficult when markets are tiedtogether, pulling at each other. Some of the new links between investments are not yet obvious because they have not been tested.Diversifying a portfolio into 30 percent selected stocks, 30 percentbonds, and 10 percent currencies seems safe until a political crisis surfaces. Then money runs to the safety of the U.S. dollar. Bonds movesharply higher, stocks move slightly higher, and the dollar gains, posting a loss in the Forex holdings. The currency allocation is reduced tocompensate for the sudden increase in risk just when the internationalproblems ease. Money flows away from the dollar, bond prices drop,the dollar drops, and stocks drop. Your holdings in currencies are toosmall to help the portfolio. So much for diversification.Even though each investment group, individual stock, and commodity is directly affected by its own fundamental factors, the global picture can overwhelm all of them. The purpose of diversification is, foremost, to protect a portfolio from extreme risk. Normally, there isample time to shift positions and take advantage of changing opportunities. With a crisis or price shock, it is too late. Investors pull fundsfrom entirely unrelated investments to cover losses elsewhere. Thiscauses all markets to reverse at the same time.
Factors That Always ExistNoiseAn unusual market move may cause you to forget that many underlyingfactors still exist. A fast move always includes some noise, which shouldbe no less than in a normal market, perhaps larger. An anticipated price ortarget level may be over- or understated by the amount of market noise.Profit taking when high volatility has clearly favored your position is away to take advantage of noise. Waiting to liquidate a position that hastaken a bad loss on a price shock shows an understanding of noise.InflationInflation moves along at a relatively steady rate. If prices do not havean upward bias, then they are going down relative to other products.This relative decline can be confirmed by a long-term drop in volatilityand a better return to risk ratio for purchases rather than sales.
28
How Changing Markets and Technology Affect Results
SeasonalityA market that does not exhibit known seasonal tendencies is still seasonal. During the prolonged devaluation of the U.S. dollar in the1980s, grain prices tended to move higher, sometimes during periodswhen seasonal patterns would have favored lower levels. Attractiveexports, combined with price parity (a buyer in any country seeks thecheapest price) causes the price of freely traded commodities to maintain a constant world value. Seasonal patterns are overwhelmed byoutside interest but still exert their influence on prices. During periodsof lower supply, the commodity price will be that much higher toinclude a supply premium. Because seasonal factors cannot beremoved, a period that overwhelms them, causing them to appearineffective, is even more volatile and more unstable than it mightseem.
Change and EvolutionAn interesting phenomenon of change is that, when events stabilize,they are never quite the same as they were. Globalization and communications, broader markets, new technology, and better quotemachines and analytic tools mean that markets are evolving. They willnever respond to one another in the same way they have in the past.The European Monetary System tries to regulate the variation(although not the volatility) between member currencies. The entry ofRussia and China into the free market system can change both the supply and demand of nearly everything. It increases the chances of shortage and surplus. U.S. stock prices could double quickly if money couldmove freely between countries. Or, money could flow to the rapidlyexpanding Asian economies, shifting the center of finance.Change means that the past does not help us to forecast the future asmuch as we would want. Unless you view the past as an evolvingprocess, trading methods that worked in the past may no longer work.If market relationships change, you cannot use old data to forec