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Never
and I mean NEVER, use Log Scale on INTRADAY CHARTS. It might be a VERY
COSTLY mistake
<SPAN
class=906091117-11042003>P.
<FONT face=Tahoma
size=2>-----Original Message-----From: uhehs@xxxxxxxx
[mailto:uhehs@xxxxxxxx]Sent: Friday, April 11, 2003 7:05
PMTo: Metastockusers@xxxxxxxxxxxxxxxSubject: RE:
[Metastockusers] Re: Logarithmic Scaling/Arithmetic
Scaling
<FONT face=Arial color=#993366
size=2><SPAN
>Sounds
good, I’m going to go with Log Scaling form now on;<SPAN
> I use daily and 15-min charts and only
about 250 days of data.
<FONT face=Arial color=#993366
size=2><SPAN
>
<FONT face=Arial color=#993366
size=2><SPAN
>Thanks
again.
<FONT face=Arial color=#993366
size=2><SPAN
>
<FONT face=Tahoma color=black
size=2><SPAN
>-----Original
Message-----From:
wavemechanic [mailto:wd78@xxxxxxxxxxxx]<SPAN
>Sent: Friday, April 11, 2003 8:31
AMTo:
Metastockusers@xxxxxxxxxxxxxxx<SPAN
>Subject: Re: [Metastockusers] Re:
Logarithmic Scaling/Arithmetic Scaling
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>----- Original
Message ----- <SPAN
>
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face=Arial color=black size=2><SPAN
>
From:<FONT face=Arial
color=black size=2><SPAN
> <A
title=uhehs@xxxxxxxx href="">uhehs@xxxxxxxx
<SPAN
>
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face=Arial color=black size=2><SPAN
>To:<FONT
face=Arial color=black size=2><SPAN
> <A
title=Metastockusers@xxxxxxxxxxxxxxx
href="">Metastockusers@xxxxxxxxxxxxxxx
<SPAN
>
<P class=MsoNormal
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face=Arial color=black size=2><SPAN
>Sent:<FONT
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> Thursday, April 10,
2003 7:29 PM<SPAN
>
<P class=MsoNormal
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>Subject:<FONT
face=Arial color=black size=2><SPAN
> RE:
[Metastockusers] Re: Logarithmic Scaling/Arithmetic Scaling<FONT
face=Arial color=black size=2><SPAN
>
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<P class=MsoNormal
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>Thank
you Harold.
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>
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>Always
something simple, isn’t it?!
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>
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>I read
that using Logarithmic Scaling was the best option, what do you
think?
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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.<SPAN
>
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>Logarithmic (Percentage) Scaling<SPAN
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>
<P
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>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.
<P
><FONT
face=Arial color=black size=2><SPAN
>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.
<P
><FONT
face=Arial color=black size=2><SPAN
>Logarithmic
scaling compresses the vertical axis on charts with large vertical ranges.
Compare the two charts below:
<TABLE
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><IMG class=shape
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"" v:dpi = "96" width = "1"
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<IMG height=208
src="jpg00133.jpg" width=360 border=0
v:shapes="_x0000_i1025">Arithmetic Scaling
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<TD
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<IMG height=208
src="jpg00134.jpg" width=360 border=0
v:shapes="_x0000_i1026">Logarithmic
Scaling<SPAN
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>
<DIV
>
<P
><FONT
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>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.
<P
><FONT
face=Arial color=black size=2><SPAN
>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.
<P
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