Long/Short Differential Gain from Historical Opening-Price Extremes

Summary

The Long/Short Differential Gain indicator compares the best hypothetical long and short outcomes over a lookback period using opening prices only. Starting from the opening price at the beginning of the window, it finds the highest and lowest opens reached during the period. The indicator reports the long gain to the highest open minus the short gain to the lowest open, expressed as a percentage of the starting open. The example parameter uses a 50-period window.

Using opens models a trader who cannot monitor prices during the session, but choosing the best future exit for each side assumes advance knowledge of the period’s extremes. The value is therefore a retrospective comparison, not an executable signal or realistic realized return; it contains look-ahead information. The document gives a formula but no empirical results, market-specific evaluation, transaction costs, or treatment of short-sale constraints. It is most useful as a descriptive measure of how favorable the window was to one direction relative to the other.

Key ideas

• The indicator compares hypothetical long and short gains from the same initial opening price.
• It uses the highest and lowest opening prices within the lookback window.
• The result is the long gain minus the short gain, expressed as a percentage.
• The example uses a 50-period lookback.
• Because the exits use future extrema, the measure is retrospective and cannot be treated as a tradable signal.

Tags

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