Cauchy Difference Indicator: Arithmetic Versus Geometric Mean Price

Summary

This brief indicator description defines the Cauchy difference as the difference between the arithmetic mean and geometric mean of price over a chosen period. For each bar, it first represents price using the average of open, high, low, and close, then applies the two types of means to that price series. The only setting described is the indicator period.

The note gives the calculation’s inputs and basic concept, but does not explain how to interpret the indicator, what market behavior it is intended to capture, or how a trader might use it in a strategy. It supplies no chart examples, parameter guidance, comparative analysis, or performance evidence. The arithmetic-geometric gap can be calculated from the stated price series, but practical significance and limitations would need to be established separately.

Key ideas

• The indicator compares arithmetic and geometric averages of a derived price series.
• Each bar’s price input is the average of its open, high, low, and close.
• The period is the only setting mentioned.
• The description offers no trading interpretation or evidence of performance.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.