A continuous contract, volume-based, back-adjusted, is a type of price representation where each futures contract are "stitch" together to show a seamless representation of price action. To better understand it let's break down each aspect:
Continuous Contract
In futures trading, contracts have expiration dates. When one contract expires, traders typically roll over their positions to the next contract to maintain exposure to the market. For example the S&P500 is a quarterly contract, each month is represented by a different letter (March = H, June = M, September = U and December = Z). A continuous contract combines the price data of multiple individual contracts into one continuous series, effectively stitching together the price data from each contract to create a long-term price history without gaps.
Volume-Based
This means that when stitching together the price data of individual contracts, the rollover (changing the contract that you trade) is based on its trading volume and not the actual rollover date. You should always prioritize the contract with the most volume to ensure the fill of your trades. Trading in an environment with poor liquidity will induce slippage (fill at a worse price) and important spread (gap between Bid and Ask).
Back-Adjusted
Futures contracts are subject to price distortions, I remind you that each are individual contract with different expiration. Back-adjustment is a method used to eliminate these distortions by adjusting historical prices of each contract to the subsequent contract prices. This adjustment effectively removes the influence of the contract rollover from the historical price series, allowing for a more accurate representation of price movements over time.


In summary, a continuous contract, volume-based, back-adjusted, provides traders with a seamless and accurate representation of price movements in a futures market over time, by combining the price data of multiple individual contracts, weighting them based on trading volume, and adjusting for distortions caused by contract rollovers. This type of contract is particularly useful for analyzing long-term trends and making informed trading decisions with accurate volume position.