# What Is Arithmetic Scale? (TOP 5 Tips)

Definition of arithmetic scale : a scale on which the value of a point corresponds to the number of graduations the point is from the scale’s zero — compare logarithmic scale.

## What is the difference between arithmetic scale and logarithmic scale?

The difference between a logarithmic and arithmetic chart scale can be seen on the vertical axis, which is the y axis. An arithmetic scale shows equal spacing between the chart units. A semi-logarithmic scale, on the other hand, is set up to measure price distances in percentage terms.

## What is an arithmetic plot?

: a graph on which both coordinates are plotted on arithmetic scales.

## What is arithmetic and logarithmic probability plots?

When data is plotted as a chart, it can be done using two types of scales—arithmetic or semi-logarithmic. This is in order to overcome the inherent weakness of the arithmetic charts. Arithmetic charts. In arithmetic or linear charts, both X and Y axes scales are plotted at an equal distance.

## What is log scale used for?

A logarithmic scale (or log scale) is a way of displaying numerical data over a very wide range of values in a compact way —typically the largest numbers in the data are hundreds or even thousands of times larger than the smallest numbers.

## What is an arithmetic scale line graph?

Arithmetic-scale line graphs. An arithmetic-scale line graph (such as Figure 4.1) shows patterns or trends over some variable, often time. In epidemiology, this type of graph is used to show long series of data and to compare several series. It is the method of choice for plotting rates over time.

## What is a logarithmic scale vs linear?

A logarithmic price scale uses the percentage of change to plot data points, so, the scale prices are not positioned equidistantly. A linear price scale uses an equal value between price scales providing an equal distance between values.

## How do you make an arithmetic scale in Excel?

Select the “Scale” tab on the Format Axis window. Click the “Logarithmic Scale” check box near the bottom of the window. This changes the chart’s axis to a log scale.

## How do you know if a graph is a logarithmic function?

When graphed, the logarithmic function is similar in shape to the square root function, but with a vertical asymptote as x approaches 0 from the right. The point (1,0) is on the graph of all logarithmic functions of the form y=logbx y = l o g b x, where b is a positive real number.

## What is arithmetic and logarithmic?

On an arithmetic scale, equal distances represent equal amounts. Thus, the distance from a value of 1 to 2 is the same as the distance from 2 to 3, 3 to 4, and so on. A logarithmic or semi-logarithmic line chart has a logarithmic scale on the y (vertical) axis and an arithmetic scale on the x (horizontal) axis.

## Why are logarithms used in probability?

There are many reasons why log probabilities are an essential tool for digital probability: (a) computers can be rather limited when representing very small numbers and (b) logs have the wonderful ability to turn multiplication into addition, and computers are much faster at addition.

## What is p value in probability plot?

The p-value is a probability that measures the evidence against the null hypothesis. Smaller p-values provide stronger evidence against the null hypothesis. Larger values for the Anderson-Darling statistic indicate that the data do not follow a normal distribution.

## How is pH a logarithmic scale?

The pH scale is logarithmic, meaning that an increase or decrease of an integer value changes the concentration by a tenfold. For example, a pH of 3 is ten times more acidic than a pH of 4. Likewise, a pH of 3 is one hundred times more acidic than a pH of 5. Similarly a pH of 11 is ten times more basic than a pH of 10.

## How do we use logarithms in real life?

Much of the power of logarithms is their usefulness in solving exponential equations. Some examples of this include sound (decibel measures), earthquakes (Richter scale), the brightness of stars, and chemistry (pH balance, a measure of acidity and alkalinity).

## What is the Difference between a Logarithmic and Arithmetic Chart?

Total Return on an annualized basis Total Return on an annualized basis The entire return generated on an investment over the course of a year is known as the annualized total return. In this case, it is calculated as a geometric average of the returns earned in each year over a period of time. Increase in the amount of money you spend (ROI) Increase in the amount of money you spend (ROI) Profitability (also known as return on investment (ROI)) is a performance indicator used to analyze the returns on an investment or to compare the efficiency of other investments.

Rate of Return on an Annualized Basis Rate of Return on an Annualized Basis Investment returns are calculated on an annual basis using the annualized rate of return.

## Arithmetic vs logarithmic: Difference between charts plotted using these two scales

ET Bureau (Economic and Technical Information Bureau) When data is displayed on a chart, it is possible to use two different types of scales: arithmetic and semi-logarithmic scales. Even if the chart is generated using the same set of data, the variation in size might cause the chart to take on an entirely different shape. Consider the following three charts, which were created using theSensexdata from the time of its inception in 1979 until the present. But why is it necessary to utilize thesemi-logarithmicscales in the first place?

1. Specifically, this is done in order to overcome the inherent weakness of arithmetic diagrams.
2. For example, the Sensex movement from 15,000 to 16,000, which represents a 1,000-point rise, is viewed as being equal to the Sensex movement from 16,000 to 17,000, which represents an additional 1,000-point increase.
3. Consider the movement of the Sensex from 20,000 to 21,000 points, which represented a measly 5 percent gain, but the movement of the first 1,000 points in the Sensex, that is, from 100 to 1,100 points, represented a massive 1,000 percent increase.
4. When looking at the arithmetic chart, the Sensex appears to have been practically flat during the first 10 years of its existence, which is explained by this.
5. This is especially necessary when the data that has to be plotted has a broad range of variation.
6. This procedure ensures that the percentage increase between two data values is displayed in a clear and understandable manner.
7. Take note that the difference between 100 and 200 (a 100 percent rise) is the same as the difference between 200 and 400 (a 400 percent decrease) (next 100 percent increase).

Semi-logarithmic graphs are used to represent data.

Given that there is no risk of distortion on the X axis (where the date range is shown), we may continue to present the share price data using the arithmetic scale.

Advantages When drawing long-term charts, or when the price points exhibit high volatility even when charting short-term charts, semi-logarithmic charts can be of great use.

Example: The extremely long-term uptrend line in the Sensex is clearly apparent in the semi-logarithmic chart (see Semilogarithmic scale with trendline), but not in the arithmetic chart (see Semi-logarithmic scale with trendline).

between 1992 and 2005, and this is only clearly seen in the semi-logarithmic chart, which is not obvious in the other charts (see Semi-logarithmic scale with channel).

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## Logarithmic Scale vs. Arithmetic Scale (Technical Analysis)

I am a strong proponent of momentum investing, as you are probably aware if you are familiar with my work. For those of you who are unfamiliar with the term, momentum investing is a technique in which the goal is to profit from the continuation of current trends. In finance, the saying “trend is your friend” comes from the assumption that stocks that are going in one way will continue to rise much further than was previously thought probable. In other words, exceptional organizations with a track record of success are more likely to continue to do well in the future.

You might be interested:  How To Find Recursive Formula For Arithmetic Sequence? (Perfect answer)

As many investors avoid these breakouts, this psychological barrier becomes increasingly problematic.

When viewing a logarithmic (log) chart scale, the difference between it and an arithmetic (linear) chart scale may be noticed on the vertical or y-axis.

The distance between a change of \$1 and a change of \$2 would be the same as the distance between a change of \$10 and a change of \$11.

## Arithmetic Scale (Linear)

Whenever the log scale chart indicates the same % change in price, the log scale chart is used. Instead of a specific dollar number, the gap between \$10 and \$11 or \$100 and \$110 will always reflect a 10 percent increase in price, rather than a specific dollar amount as indicated by the linear scale chart.

## Logarithmic Scale (Log)

Traders attempting to catch short-term price movement may find linear scale charts to be more useful than bar charts. When looking at long-term price history on a linear scale, the chart might appear parabolic, which can be frightening to retail investors who are unfamiliar with technical analysis. In most cases, a log scale chart should be utilized when the price range of an asset throughout the time period being investigated is more than 20%. It is also recommended to draw log scale charts for long-term data that spans more than a handful of years.

The log scale can assist investors in visualizing a beautiful constant rise while also easing chart volatility, which in turn serves to remove emotion from the equation of trading.

Kinaxis was the subject of my first blog post back in December, when the stock’s price action began to break over \$75, indicating a momentum alert buy signal.

Despite the fact that the 12 percent wasn’t a smooth journey. When comparing the two charts below, it becomes clear that the log scale chart may assist an investor stay with a trade by removing the appearance of volatility (emotion) and by encouraging an investor to stay with a transaction.

## Kinaxis -Arithmetic Scale

One of our members came up with the brilliant concept for this blog, which we are thrilled to implement. To summarize, there is no better way to conclude than with their comment, “The use of the log scale while looking at a stock chart is tremendously illuminating in many ways. Great organizations tend to have long-term track records that are quite linear up to the right when seen on a log scale, but that are frighteningly parabolic when viewed on a linear graph, as shown in the graph below. Stock charts with linear growth, which I believe most retail investors focus on, may scare away buyers from investing in a great company.

1. We recommend that you encourage your readers to look at a long-term log scale graph throughout their due diligence process when selecting companies, particularly when selecting growth stocks.” Do you have a question?
2. Get a free trial of 5i Research by clicking here.
3. Disclosure: The author does not hold any of the stocks discussed in this article.
4. Please conduct your own due diligence before making a judgment on a potential investment.

## Arithmetic vs logarithmic: Difference between charts plotted using these two scales

ET Bureau (Economic and Technical Information Bureau) When data is displayed on a chart, it is possible to use two different types of scales: arithmetic and semi-logarithmic scales. Even if the chart is generated using the same set of data, the variation in size might cause the chart to take on an entirely different shape. Consider the following three charts, which were created using theSensexdata from the time of its creation in 1979 till the present. But why is it necessary to utilize thesemi-logarithmicscales in the first place?

1. Specifically, this is done in order to overcome the intrinsic weakness of arithmetic diagrams.
2. For example, the Sensex movement from 15,000 to 16,000, which represents a 1,000-point rise, is viewed as being equal to the Sensex movement from 16,000 to 17,000, which represents an additional 1,000-point increase.
3. Consider the movement of the Sensex from 20,000 to 21,000 points, which represented a measly 5 percent gain, but the movement of the first 1,000 points in the Sensex, that is, from 100 to 1,100 points, represented a massive 1,000 percent increase.
4. When looking at the arithmetic chart, the Sensex appears to have been practically flat during the first 10 years of its existence, which is explained by this.
5. This is especially necessary when the data that has to be plotted has a broad range of variation.
6. This procedure ensures that the percentage increase between two data values is displayed in a clear and understandable manner.
7. Take note that the difference between 100 and 200 (a 100 percent rise) is the same as the difference between 200 and 400 (a 400 percent decrease) (next 100 percent increase).

Semi-logarithmic graphs are used to represent data.

Given that there is no risk of distortion on the X axis (where the date range is shown), we may continue to present the share price data using the arithmetic scale.

Advantages When drawing long-term charts, or when the price points exhibit high volatility even when charting short-term charts, semi-logarithmic charts can be of great use.

Example: The extremely long-term uptrend line in the Sensex is clearly apparent in the semi-logarithmic chart (see Semilogarithmic scale with trendline), but not in the arithmetic chart (see Semi-logarithmic scale with trendline).

between 1992 and 2005, and this is only clearly seen in the semi-logarithmic chart, which is not obvious in the other charts (see Semi-logarithmic scale with channel).

(Follow The Economic Times for all the latest business news, breaking news events, and breaking news updates.) Download The Economic Times News App to receive daily market updates as well as real-time business information. moreless

## Chart Scales – Arithmetic Vs. Logarithmic

 Chart reading is often more art than science; but there are definite, quantifiable aspects of charting that are very important.The most basic attribute of chart creation is in the choice of scales used to represent the data.As you can see in the two charts below, as they toggle back and forth, there is a significant difference in appearance between the two.These two charts are actually constructed from the same data. Arithmetic scaling measures an equal amount of numerical change. The difference in appearance is due to the scaling of the vertical axis, which is listed on the right side of the chart.The standard scaling used on most charts is arithmetic (pronounced: ar-ith-‘met-ic, rather than a-‘rith-me-tic).It is based on the units of the chart axis have equal spacing.The measurements of a ruler or tape measure are a common example.In the Arithmetic Chart above, the spacing between the numbers of the vertical axis is equal to 2000 points of the Dow Jones Industrial Average. Logarithmic scaling measures an equal amount of percentage change. The term “semi-logarithmic” refers to one axis being arithmetic and one axis being logarithmic.In stock market charting, the x axis (horizontal) measures the amount of time.This measurement demands the use of arithmetic scaling since every unit of time (day, week, month, year, etc.) is equal in length.The y axis (vertical) measures the amount of change in stock price or market index.In the Semi-Logarithmic Chart above, each space on the y axis measures a 100% increase in the units measured (Ex: 125, 250, 500, 1000, 2000 etc.). Logarithmic scales represent an equal amount of percentage change.Arithmetic scales represent an equal amount of numerical change. In reviewing the figure below, consider how a one point change in a \$10 stock is vastly greater than a one point change in a \$100 stock and how a 50 point increase in the Dow Jones today, is considerably less important than it was, just a few years ago. Using the Logarithmic Scale, notice that the spaces between 1, 2, 4, 8, and 16 are equal.Each space measures a 100% increase becauselogarithmic units measure equal percentage change. Valid comparisons can only be made with units of percentage change; that is, logarithmic. Charts produced by the media can be a disadvantage for the individual investor. The concept of measuring percentage change is extremely important in all areas of finance.It is routinely used for stating expectations and reporting results.However, the reporting of historical stock prices in graphical format using “units of percentage change” has been, for the most part, neglected by the media.The examples above clearly demonstrate how deceptive charts can be. Conclusion: Semi-logarithmic charting is required for identifying long term trends. Trend Identification with Semi-Log Charts HistoryDynamicsAnalyticsHome

The x-axis and the they-axis are the two axes that make up a market chart. Whereas the x-axis represents the date, the y-axis represents the value of the asset. The y-axis can be plotted using either an arithmetic scale or a logarithmic scale, depending on the situation. Whichever option you choose, it will have consequences for your trade. The arithmetic scale is as follows: Price levels are evenly spaced on an arithmetic scaled chart, and the distance between them is equal. Whenever the price of gold climbs, as it did from 1000.20 to 1500.20 and from 1780.20 to 1980.20 for silver, the grid spacing on the chart remains the same.

1. The logarithmic scale is as follows: The log chart is scaled in accordance with the percentage of moves.
2. The same goldchart, but with a logarithmic scale shown.
3. You will begin to notice significant variations when there are substantial price fluctuations, on the other hand.
4. The use of both arithmetic and logarithmic charts for trading would be considered by position traders who deal in the long term, on the other hand.

## How Linear (Arithmetic) Price Charts Differ From Logarithmic Charts

There are several different chart types available to view the price movements of an asset, including candlesticks, open-high–low–close (OHLC), and Renko (among others). Charts can alternatively be displayed on a linear (arithmetic) or logarithmic scale, depending on the application. Prices can be shown in either a linear or logarithmic scale on most charting and trading systems, and most trading platforms enable you to switch between the two. Although they may appear to be identical at first sight, there are substantial variations between these two types of charts.

### Key Takeaways

• There are several alternative chart types available for viewing asset price changes, depending on whether the scale is linear (arithmetic) or logarithmic. In a chart, the difference between a linear and a logarithmic y-axis (the price part) is the spacing between the lines on the y-axis. On a linear chart, the price spacing is equal
• The reference points along the y-axis rise in equal increments with equal spacing between them
• And the reference points along the x-axis ascend with equal spacing between them. This differs from logarithmic or logarithmic-like charts. An exponential log chart is one in which the y-axis is scaled depending on percentage changes.

## How Linear and Log Charts Differ

It is the spacing of the y-axis (the price part) of a chart that distinguishes it from linear and logarithmic charts. The time is drawn along the bottom of the chart (the x-axis) and the price is plotted along the top of the chart (the y-axis) in candlestick and OHLC charts, as well as most other chart styles. On a linear chart, the price spacing is the same for all of the prices. The reference points along the y-axis climb in equal increments, with equal spacing between each point along the axis.

1. The chart is a grid with equal spaces between each row and column.
2. The grid spacing on the chart does not change if the price increases from \$1 to \$10, or from \$10 to \$50.
3. The y-axis of a log chart is scaled in proportion to the percentage changes in the data.
4. Assume that the \$1 (100 percent) increase in value takes up four inches of chart space.
5. (4 inches for each, in this case).
6. Therefore, if an initial % move takes up X inches of chart area, any subsequent percentage move (of the same amount) will take up X inches of chart space as well, no matter how high or low the price moves.
7. A price change from \$3 to \$4 covers the same amount of ground as a price change from \$1 to \$2.
8. The log chart accurately depicts the difference in percentage increase, but the linear chart does not.
9. Across the whole line of the linear chart, all one-dollar changes occupy the same amount of visible area.

A set distance separates price levels on linear charts; however, the same cannot be said for percentage changes on log charts (see Figure 1). FIGURE 1 depicts a comparison between a linear and a log chart, both for the same stock and during the same time period, respectively.

## Choosing Linear or Log Charts

Default scaling in some charting software will be on a linear scale, whereas default scaling in other charting software will be on a logarithmic scale. Most charting platforms allow you to change this setting (if you can’t find it, look in the help section for your charting platform for instructions). Either setting can be utilized; however, the interpretation of the chart may be influenced by the setting selected. In most cases, linear charts will be used for short-term trades since these traders are only interested with how much the price moves (in dollar terms).

Long-term traders may find it beneficial to watch both log and linear charts in order to acquire a new viewpoint, particularly when looking at charts that span years or have considerable price discrepancies between them.

## Final Word on Linear and Logarithmic Charts

If you are a short-term trader, you should adhere to linear charts for your charting and charting analysis. Because percentage changes are rarely that substantial over a short period of time, there is no need to acquire a new viewpoint by using a log chart instead of a bar chart (it will look pretty much the same). Long-term traders may find it beneficial to examine both log and linear charts simultaneously. They will be able to monitor both the movement of the dollar as well as how that scaled in percentage terms.

## Logarithmic and Arithmetic Scales for Line Graphs on JSTOR

Information about the Journal It is an absolute must-have for middle and high school teachers and administrators to have access to the Clearing House. Teaching Techniques and Administrative Procedures, School Programs and Professional Development are among the topics covered in this journal, which focuses on the “how to” aspect of the profession. Additionally, theoretical papers, comparative education pieces, and in-depth investigations of significant educational challenges are published in this journal.

Information about the publisher Based on more than two centuries of expertise, TaylorFrancis has expanded significantly during the last two decades to become one of the world’s most prestigious academic publishers.

The Group also publishes over 800 journals and more than 1,800 new books each year. TaylorFrancis is completely dedicated to the publishing and distribution of scholarly knowledge of the greatest caliber, and this continues to be the company’s major purpose today as well.

## When you evaluate stock charts, do you use logarithmic or linear arithmetic charts?

Hello, everyone. This is Sasha Evdakov from tradersfly.com, and I’m here to answer a couple of your questions on investing and trading. Consequently, the topic for this week is “When evaluating stock charts, do you prefer logarithmic or linear arithmetic charts?” Specifically, this question is about the type of charts that I employ. It is based on the concept of scale. As a result, I’d like to share an image with you. And that will serve as an illustration for a couple of points.

## Arithmetic scale

In the first place, if we look at this arithmetic scale, we can see that everything is proportionate between the numbers one and two, between the numbers two and three, and that the space between those hash marks remains constant all the way up to the number thirteen.

## Logarithmic scale

If we look at the logarithmic scale, we can see that as we move closer to the higher numbers, the gap between five and six begins to get less than the distance between one and two, which is a good thing. Similarly, the margin between six and seven is becoming increasingly narrow, and the distance between seven and eight is becoming much narrower. Even though I didn’t have room to write down the numbers as we continued to travel up the scale, the numbers started to grow closer and closer together as we continued to move up the scale.

## When should you use the logarithmic charts?

What are arithmetic charts, and how do they work? Well, arithmetic charts, also known as linear charts, are charts in which the price values on the chart are the same distances or lengths as the distances or lengths shown in the figure you just saw. As opposed to this, the logarithmic chart or log charting scales the scale, which is often fantastic for stock charts that are a little bit overextended or explosive, which is typically when you’d utilize it. You can notice the difference between this visual right here, which has the arithmetic, and this visual right here, which has the logarithmic, by comparing them.

## What I prefer

What I want to know is, what do I watch? In most cases, I refer to the mathematical charts, which account for more than 99 percent of my decisions. I do look at logarithmic charts from time to time if a stock chart is particularly volatile and it is deemed relevant by the analyst. However, this is an uncommon and infrequent occurrence. Allow us to use the charts as an illustration in this section. On the monthly chart, I’ve included a basic chart of apple; on the daily chart, I’ve included something a little bit more of a shorter-term perspective on the apple market.

• You’ll note that my chart has something in the lower right-hand corner, while your chart could have something else there.
• The charting software I’m using is TC2000, or freestockcharts.com, and the scaling option is marked with a “A,” which indicates arithmetic scaling or logarithmic scaling, as you can see.
• Take note of the difference between logarithmic and arithmetic if I select logarithmic.
• When I zoom out a little bit more and look at it, I like to see nice, even scaling and spacing.
• Again, if we go a little bit further out, you can see the difference, and if we move a little bit further out, you can see the change even more dramatically.
• I’ve added arithmetic scaling, but if you look at it in logarithmic, you can see how the market is starting to tighten up significantly.
• Even on these weekly charts, I don’t generally use logarithmic scaling since I want smooth, even scaling.
• Nevertheless, I prefer to utilize mathematical scaling the vast majority of the time (I’d say 99 percent of the time), and this is simply a matter of personal choice because the trend lines come out cleanly.

However, keep in mind that if you’re drawing a linear line, it may not always come out perfectly on the logarithmic scale, as opposed to the arithmetic scale, because the logarithmic scale is an accelerated curve, so this is something to keep in mind.

## Logarithmic or Arithmetic Scale?

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Is it better to use an arithmetic or a logarithmic scale? Graphs, tables, and analyses that are exclusive to the author – all rights reserved. SignalTrend192119291932 192119291932 192119291932 192119291932 A A BArithmetic: A A BArithmetic: The Dow Jones Industrial Average is depicted in both of the graphs above for the same time period (1921-1932). Both graphs are correct in their estimations. They do, however, employ distinct scales. Each unit of price change is represented by an identical distance on the arithmetic scale (see chart on the left).

1. Each point, on the other hand, shows a different percentage change.
2. ) However, a 40-point rise from 40 implies a one-hundred percent increase.) Examine the gray and green lines on the Arithmetic (left)graph to have a better understanding of the situation.
3. That is a 40-point improvement (33 percent increase from 120).
4. That is a gain of 80 points (33 percent increase from 240).
5. In reality, though, they each represent a 33 percent increase in the overall movement.
6. Example: A movement from 80 to 160 (a 100 percent increase) would be equal in vertical distance on the Logarithmicchart to a movement from 160 to 320 (a 50 percent reduction in vertical distance (also a 100 percent increase but twice as many points).
7. A cursory examination of the arithmetic graph (on the left) might lead one to conclude that the market grew far more quickly from point B to point C than it did from point A to B.

In contrast, a closer look at the Log graph (right) indicates that the rate of appreciation during period AB was nearly identical to the rate of appreciation that happened during period BC.

What am I supposed to do with this information?

The pre-crash period would have given the incorrect impression to investors who saw the market in mathematical scale that the market fell because it escalated in a drastically accelerated upward slope that was clearly unsustainable.

Investors were conditioned to invest trust in the market that it did not merit as a result of years of unbroken success.

When the bear came, too many people panicked, and the market lost 90 percent of its value as a result of the panic.

Observations:Arithmetic scale graphs may give the illusion of acceleration when they are not actually accelerating.

The logarithmic scale is used to show percentage changes in the stock market. 120 160 200 240 280 320 360 400 320 160 DJIA is the arithmetic scale (1921-1932) DJIA on a logarithmic scale (1921-1932)

## Arithmetic vs. Logarithmic scales

The issue of chart scales is not one that is explored very often. I believe that everyone has resolved on the Arithmetic scales, in which the vertical axis of the chart is split into equal price increments, as their preferred scale. According to this scale, which is the one used in the vast majority of charts that you will see online and in the media, we might claim that we are on a “normal scale.” The vertical axis of a chart is divided into equal price incrementspercentage units when using the logarithmic scale.

1. When viewing a long-term chart for a securities that has had a considerable gain or decrease in price over time, the Arithmetic scale can even be misleading in its interpretation.
2. I recently came across an investor’s proposal to invest in AMD.
3. Included are the XBP Sine Wave, XBP Price Bars, and the XBP Volume Indication, with the lowest indicator being the XBP Volume Indicator.
4. So that we can more clearly distinguish between the two trend lines, let’s name the first one Trend Line 1, which links the lows of February and November 2016, and Trend Line 2, which connects the lows of November and May 2017.
5. For the time being, let’s take a look at the price activity on the Arithmetic scale chart.
6. On the other side, Trend Line 2 appears to have served as support in recent days, with the price of the cryptocurrency rebounding off of it.
7. As an example, let’s look at the exact same chart, but this time using the Logarithmic price axis scale: In this case, Trend Line 1 provides an explanation for the gap that occurred at the beginning of May 2017.
8. As a result of the price movement that happened following the gap, Trend Line 2 performs much better.

We might now begin to have reservations about the advise to purchase AMD at this time. I’ll be keeping an eye on the case of AMD and will give updates as the tale develops. What are your thoughts on AMD? Should you buy, sell, or hold?

## Chart Scale: Logarithmic or Arithmetic?

This past week, someone inquired as to why AAPL appeared to be trading above a downtrend line on one chart but trading below the same downtrend line on another. What a great question! Briefly, the scale on the two charts differs. This is the quick answer. When using your charting application or trading platform, you may have come across the terms logarithmic’ and arithmetic,’ and wondered what they were meant to mean. With the exception of any esoteric terminology that you might want to use at your next cocktail party, they’re basically just references to the spacing between prices on your charts.

• Of course, there is more to them than that, but for the sake of this piece, it is the most significant distinction.
• I’m delighted that you inquired!
• Short-term traders, on the other hand, are more likely to use arithmetic charts since they want to observe comparable dollar movements to scale.
• As I indicated at the beginning of this essay, Apple’s stock is currently trading below its downtrend line.
• A mathematical chart shows that AAPL broke over its downtrend line on March 18 as it broke through the \$445 mark (which I happened to highlight the night before for members).
• On the logarithmic chart, on the other hand, AAPL stayed below its key downtrend line until it crossed the \$458 mark on March 22, when it began to rise.
• When comparing these two charts, it is clear that there are significant variances, even for the most basic of trend line crossings.
• That makes a major impact to a swing trader like myself who regularly employs trend lines in his trading.
• Trade Like a Billionaire!
• To get our trades, sign up for a free trial of our Stock Pick Service.

## Scale – Arithmetic or Semi-Log?

The option of which scale to use on your charts has a significant impact on how trend lines are shown. Which scale is the most appropriate? To see a larger version of the chart, click here. On an arithmetic scale, the figure above depicts the weekly performance of Gold 2. It is important to note that the bear market trend line has been violated, although it is not clear where exactly the price found support and resistance during the process. To see a larger version of the chart, click here. The figure above depicts the weekly performance of Gold 2 on a semi-logarithmic scale.

1. When dealing with short-term price swings, an arithmetic scale is the ideal tool to utilize.
2. Any long-term movement lasting more than a year should always be measured in a semi-logarithmic or ratio scale.
3. The importance of percentage relationships in the trading of securities goes without saying.
4. ” As a result, long-term price changes should be represented on a ratio or logarithmic scale to illustrate their significance.

It is usually preferable to me to use a ratio scale for durations longer than one year, because the variations are significantly bigger.” Published at 4:28 p.m. Eastern Standard Time.

## Technical Analysis lessons (4): What are the differences between arithmetic and semi-logarithmic charts ?

Price scales that are mathematical or logarithmic in nature can be used to produce charts. For some sorts of research, particularly for extremely long-term trend analysis, log charts may have some advantages over bar charts or line charts. The vertical pricing scale, like the arithmetic scale, indicates an equal distance for each unit of change in the price of anything. As a result, each point on the mathematical scale is equally far from the others. On the log scale, on the other hand, the percentage increases get less as the price scale becomes larger.

Due to the fact that a rise from 2 to 4 indicates a doubling of the price, yet a rise from 20 to 22 represents just a 10% increase in price, arithmetic scaling is not an appropriate choice for long-term price fluctuations.

The choice of scale has little effect on daily or intraday charts, in which price fluctuations are tiny in comparison to the time interval being displayed.

In certain circumstances, it is beneficial to utilize log charts for both daily and weekly charts.

Calculating price objectives with the use of measurement techniques is quite important when performing chart analysis.

Always keep in mind that market prices are a result of people’s psychological reactions to major occurrences.

The selection of the appropriate scale is even more crucial for the timely and effective application of trendline analysis since, towards the conclusion of a large movement, prices tend to accelerate in the direction of the dominant trendline analysis method.

On the other hand, on the mathematical scale, downward trendlines are broken more frequently.