Discussion in 'Technical Analysis' started by Port1385, Jan 4, 2009.
Should we use Log or Linear charts? Which and why should we use them?
Depends on whether you trade with linear or logarithmic money. But keep an eye on inflation. You might want to consider hyperbolic.
This thread exemplifies precisely what is wrong with ET. A questioner comes in with a legitimate, honest question and he's as likely to get some smartass comment as a legitimate, honest answer.
In response to the OP, logarithmic charts may give you a better sense of actual returns. I tend to use log returns for trading signals and linear money for actual transactions, fwiw.
I use Log but it doesn't matter for daytrading. Log charts are best for long time charts. Weeklies, Monthlies. It scales the charts so that the moves are the same % wise.
A log chart is useful when you are looking at a chart that contains a large price range which is typical of many long term charts or shorter term parabolic charts.
With a log chart you don't lose the details of past moves such as the chart of the Naz for example, where the details of the 1970's moves are lost on a linear chart yet still clear on a log chart.
Usually the one which is easier on the eyes
usually log, if that is easier on the eyes.
May also want to consider a PSAR[parabolic stop & reverse also],
if you like wise,
& like easy on the eyes.
PSAR is a bit slow,[even for a turtle, or a bear in winter] so i seldom use it without discretion.
My concern of Log vs Lineal is the drawing of Trendlines, Support/Resistance; Fibonacci Lines... specially Paralell lines are skewed in Log scale.
Any thoughts on drawing?
Use 1 and stick to it. In all honesty I don't think there's a right answer.
Second best would be to use a natural chart until it makes severe moves...then adjust.
I second that.
Most of us have been used to linear charts for years. How to properly draw those TA lines on the log scale charts? Are those TA lines on log scale charts as effective as on the linear charts? These are the two main questions.
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