Evaluating Stock Charts: Logarithmic vs Linear / Arithmetic Charts?

What’s the difference between logarithmic vs. linear charts?

When we look at the arithmetic scale, we can see that everything is proportional, the distance between the hash marks is the same, all the way up to the last number of the scale.

On the other hand, if we analyze the logarithmic scale, you can see that as we go to the higher numbers, the distance between the numbers starts to get smaller and smaller.

When it comes to the stock market, arithmetic charts are also known as linear charts, which means the price value on the charts is the same distance or length, whereas the logarithmic charts stretch the scale as it goes up and up.

Which one is better?

Logarithmic charts are great for stock charts that are over-extended or explosive. Personally, I look at the arithmetic charts more than 99% of the time. I do use logarithmic charts from time to time if a stock chart is explosive. However, this is rare and not very often.

In this video, we’re going to analyze some stock charts, where you’ll be able to see some examples of the difference between the arithmetic vs. the logarithmic scale in real life.
#evaluatingcharts #stockcharts #arithmeticcharts #linearcharts #logcharts

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[UncleBrianHK]

Now I know the difference.... but what different info do you get out of logarithmic? This video fails to explain that.

[serpenttrader]

Ok, you are wrong! Even though on shorter term charts it doesn't seem to make much of a difference, Log charts should always be used if you are placing technical indicators like trend lines. Aside from @Nug g excellent explanation of how growth is exponential, the price is a representation of not just fundamentals but the fears and greeds of all the participants involved. If you buy $5000 worth of shares at 50 cent then sell at $1, you have doubled your money. If you buy $5000 worth of shares at $2 and sell at $4 you have also doubled your money. Hence the 'feeling' is the same. This is better represented on a logarithmic scale as the distance would be the same, i.e. a doubling.

[dumbcat]

in the example of a parabolic move (which are typically unsustainable) i think people can get in trouble viewing logarithmic charts because the parabolic curve is muted, so they don't see it

[canoai]

A long term investor/trader should only and I repeat ONLY look at logarithmic charts. Percentage gains and loses are all that matters. From 2 to 4 There is %100 gain while from 102 to 104 gain is less than %1. Difference is 2 nevertheless

[vinny]

Crypto charts are perfect example of when to use the LOG Scale

[caveymoley]

Okay, but what is the purpose of logarithmic vs Arithmetic ? :/

[mehditaba]

Hi
Hope you're having a good time.
I have a question!

Suppose I, as a weekly swing trader, set the chart on logarithmic option and draw a parallel channel or a trend line from the past to the present. For example, a year and a half ago until now.
If we say that a weekly swing trader should not go to that long past, that is short-sighted, because a valid parallel channel is a parallel channel in which the price has fluctuated many times and a line of resistance comes from the past.

My question is when we set the chart on logarithmic mode and then we came to the present, do we have to switch to arithmetic (linear) or not?

What should we do if we switch to arithmetic (linear) mode and our parallel channel or trend line gets distorted or out of shape and shows us a wrong result?

Thanks in advance.

[dantefuego]

Define Explosive? As im trading AMC we have an interesting theory using Fractals from last years "squeeze" but we base the theory off Linear, when comparing to Log it throws off the lines of the descending wedge indicating a false breakout.. its a very clear break out on linear

[MrRonaldlee]

where can I go to use the chart you were using for your example?

[perryjaialai]

Sasha thank you for explaining that I would never have known what Logarithmic / Arithmetic charts were. Can you put Lifelock in one of your charts?

[smalltime]

:Love it!! Great question great answer

[yasinzeydulusoy]

So is it better to draw linear support or resistance line on logarithmic or linear chart?

[akumar]

I have seen people using Natural Log "log (p2/p1)", while calculating daily returns of stock/Index for long period data (15-20 years), instead of using '(p2 - p1)/p1'. Could not know very good reason.

Is it more accurate to use Natural Log ?

Can you make a Video on this in detail for benefit of all of us.

Rgds.

[junglemama]

dude u didnt even draw the same line as in linear and say it is different...wtf

[FFox]

Good video. Never heard anyone pronounce ‘arithmetic’ that way.

[jellyjams]

You can’t say the scale gets tighter and tighter then two seconds later say the scale gets strectched. I my mind these are two contradicting concepts making learning from you to be instantly frustrating.