First, a correction - technically, these are semi-logarithmic charts, not logarithmic.
For intra-day charts, it generally doesn't make much difference - except for the occasional stock that doubles in a day. :)
For daily charts, semi-log charts are a must! I can't imagine trading with arithmetic charts.
On a semi-log chart, the distance on the vertical axis for any percentage change is the same.
On an aritmetic chart, the distance on the verticla axis for any dolloar change is the same.
In other words, on an arithmetic chart, the distance from $1 to $2 (a 100% difference) is the same as the distance from $10 to $11 (a 10% difference). On a semi-log chart, the distance from $1 to $2 is the same as the distance from $10 to $20.
The stock doubled from $1 to $2 and from $10 to $20. Why should the chart show a different distance for both identical moves?
BTW, when your local newspaper wants to either scare or awe you about the current state of the market, they almost always use arithmetic charts. :) |
