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Re: [Metastockusers] Re: Logarithmic Scaling/Arithmetic Scaling



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  ----- Original Message ----- 
  <DIV 
  >From: 
  uhehs@xxxxxxxx 
  To: <A 
  title=Metastockusers@xxxxxxxxxxxxxxx 
  href="">Metastockusers@xxxxxxxxxxxxxxx 
  
  Sent: Thursday, April 10, 2003 7:29 
  PM
  Subject: RE: [Metastockusers] Re: 
  Logarithmic Scaling/Arithmetic Scaling
  
  
  <FONT face=Arial color=navy 
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  >Thank 
  you Harold.
  <FONT face=Arial color=navy 
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  > 
  <FONT face=Arial color=navy 
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  >Always 
  something simple, isn’t it?!
  <FONT face=Arial color=navy 
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  > 
  <FONT face=Arial color=navy 
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  >I read 
  that using Logarithmic Scaling was the best option, what do you 
  think?
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  > 
  <FONT face=Arial color=#000000 
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  >The 
  following is a brief discussion of log vs linear scaling.  The general 
  consensus is that linear is OK for short times, but then log is used.  
  Usually the cutoff is 1 year, and the difference below 1 year is usually 
  quite small.
  <FONT face=Arial color=#000000 
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  > 
  <FONT face=Arial color=#000000 
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  ><FONT 
  size=3>Logarithmic (Percentage) Scaling
  On a Logarithmic (Percentage) scale chart, the vertical spacing between two 
  points corresponds to the percentage change between those numbers. Thus, on a 
  log scale chart, the vertical distance between 10 and 20 (a 100% increase) is 
  the same as the vertical distance between 50 and 100. Because these charts 
  show percentage relationships, logarithmic scaling is also called "Percentage" 
  scaling. It is also called "Semi-Log" scaling because only one of the axes 
  (the vertical one) is scaled logarithmically.
  The other popular scaling option is Arithmetic scaling (AKA linear 
  scaling). On charts with large vertical ranges, technicians typically use log 
  scaling because it results in a truer picture of the price action.
  Logarithmic scaling compresses the vertical axis on charts with large 
  vertical ranges. Compare the two charts below:
  
  
    
    
      
        
          
          
            
              
              <IMG alt="" 
              src="png00002.png" 
              border=0>Arithmetic Scaling 
            
              
              <IMG alt="" 
              src="png00003.png" 
              border=0>Logarithmic 
      Scaling
  Compare the period from 1994 to 1996 on the two IBM charts above. On the 
  arithmetic chart, things appears to be a very quiet during that time 
  period with the line increasing very gradually. On the log scale chart things 
  look very different - the price line rises dramatically in the first two 
  years. Given that the stock more than doubled during that period, the 
  arithmetic scale chart paints a very misleading picture of the price 
  action.
  Similarly, compare the price action during the first half of 1999. On the 
  arithmetic chart, this visually dramatic increase dominates the entire chart. 
  On the log scale chart, it is much less prominent. During that time, the price 
  rose from roughly 80 to roughly 140, an increase of 75%. While that kind of 
  increase is very nice, it is misleading to have that move visually dominate a 
  chart that shows an overall increase of roughly 1300%. Again, the arithmetic 
  chart leaves an inaccurate impression.
  
  <FONT face=Arial color=#000000 
  size=2><SPAN 
  > 






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