Course Name: Day Trading Strategies for Beginners, Section No: 6, Unit No: 17, Unit type: Notebook
In the previous jupyter notebook returns calculated is adj. close - adj. open divided by adj open of the same day whereas in improved gap strategy returns is calculated with the difference of adj open and adj close of the previous day. Why this difference?
Hi Rishab,
Thank you for your query. You are right, there is a difference in the calculation. Let me try to elaborate on the reason.
In Section 6 unit 10, for implementing a gap strategy, we take the strategy returns as the (adj. close - adj. open divided by adj open of the same day) * (position).
However, in section 6 unit 17, to improve the gap strategy, we use a filter, where we look at yesterday's prices as well. I understand your confusion as we have used the same term "returns" in both notebooks. You can see later on in the notebook (cell 15) that we have used the same formula i.e. (adj. close - adj. open divided by adj open of the same day) * (position) for calculating the strategy returns.
Thus, the formula to calculate the strategy returns is the same in both notebooks.
I hope this helps.