Logrithmic or Linear

Discussion in 'Trading Software' started by rcarlton88, Dec 17, 2007.

  1. Will someone explain to me the difference between looking at a stock chart with a logrithmic scale or a linear one.
  2. Not only the difference but what the advantages/disadvantages are of each.

  3. Davdse


    Absolute vs relative returns. Every type of trader/investor will have his preferred type of chart.
  4. MTE


    Let's take an example of the stock moving from 5 to 10 and from 50 to 55.

    On a linear scale the 2 moves would look the same as they are both 5 points.

    On a log scale the moves won't be the same, cause a move from 5 to 10 is 100%, and from 50 to 55 is only 10%.

    For intraday charts linear is OK, but for longer term charts you need to look at log scale so that the same % moves are displayed accurately.
  5. Thanks for the replys,

    If I go to a finance site for example Google Finance and go to Apple (AAPL) and view the stock for the past several months, the only difference the chart shows between Log and Linear is that it shifts up 1/2 of a mm in the Log graph compared to Linear.

    Is that correct?
  6. MTE


    If you look on the price scale you'll see that a linear scale is evenly spaced, a log scale will be drawn out at the bottom and "squished" at the top to account for % moves rather than $ moves.

    On a longer time frame it is clearly visible. Just try AAPL 5 years.