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Peter:
Attached are two intraday charts for ESM03M showing
linear and semi-logarithmic scales. Would you can explain why the linear
scale is better than semi-logarithmic, and specifically how the difference
in scaling affects your trading.
Thanks.
<FONT
size=2>
Bill
<BLOCKQUOTE
>
----- Original Message -----
<DIV
>From:
Petros Lazos
To: <A
title=Metastockusers@xxxxxxxxxxxxxxx
href="">Metastockusers@xxxxxxxxxxxxxxx
Sent: Saturday, April 12, 2003 6:02
AM
Subject: RE: [Metastockusers] Re:
Logarithmic Scaling/Arithmetic Scaling
<FONT face=Arial color=#0000ff
size=2>OK...as I can neither write a complete passage nor post
relevant charts, due to my time availability, I'll, just, recommend that you
take two charts of the same market and the same timeframe(less than 150 days,
intraday or daily) and try to make some paper trading based on breakouts or
breakdowns; or, on the same charts, try to define some formations(of more than
one day duration in intraday or a week in daily, less than that has no
deference if in log or arithmetic). I believe it will be quite obvious, even
by just one look, how misleading a log chart can be, in short term
timeframes.
<FONT face=Arial color=#0000ff
size=2>During next week, IF I can get some time available, I'll
try to post an example.
<FONT face=Arial color=#0000ff
size=2>P.
PS I
believe wavemechanic, a few
messages ago, with his IBM's charts, showed quite well what I mean. Just think
of them as 15min-multiday charts and not multiyear ones.You would have
caught the multiyear "slow" uptrend sooner or later, either on log or
arithmetic, but would you like NOT to trade the 1999 M formation on an
intraday bases??If not, it would mean some 25-30 points on a 100 points
market!!!;-))
<FONT face=Tahoma
size=2>-----Original Message-----From: uhehs@xxxxxxxx
[mailto:uhehs@xxxxxxxx]Sent: Friday, April 11, 2003 8:19
PMTo: Metastockusers@xxxxxxxxxxxxxxxSubject: RE:
[Metastockusers] Re: Logarithmic Scaling/Arithmetic
Scaling
<FONT face=Arial color=#003300
size=2><SPAN
>Petros,
<FONT face=Arial color=#003300
size=2><SPAN
>
<FONT face=Arial color=#003300
size=2><SPAN
>Can
you explain?
<FONT face=Arial color=#003300
size=2><SPAN
>
<FONT face=Tahoma color=black
size=2><SPAN
>-----Original
Message-----From: Petros
Lazos [mailto:peter_laso@xxxxxx]<SPAN
>Sent: Friday, April 11, 2003 1:13
PMTo:
Metastockusers@xxxxxxxxxxxxxxx<SPAN
>Subject: RE: [Metastockusers] Re:
Logarithmic Scaling/Arithmetic Scaling
<FONT face="Times New Roman"
size=3><SPAN
>
<FONT face=Arial color=blue
size=2>Never
and I mean NEVER, use Log Scale on INTRADAY CHARTS. It might be a VERY
COSTLY mistake<SPAN
>
<FONT face=Arial color=blue
size=2><SPAN
>P.<FONT
color=black><SPAN
>
<P class=MsoNormal
><FONT
face=Tahoma color=black size=2><SPAN
>-----Original
Message-----From:
uhehs@xxxxxxxx [mailto:uhehs@xxxxxxxx]<SPAN
>Sent: Friday, April 11, 2003 7:05
PMTo:
Metastockusers@xxxxxxxxxxxxxxx<SPAN
>Subject: RE: [Metastockusers] Re:
Logarithmic Scaling/Arithmetic Scaling<SPAN
>
<P class=MsoNormal
><SPAN
class=EmailStyle21><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.
<P class=MsoNormal
><SPAN
class=EmailStyle21><SPAN
>
<P class=MsoNormal
><SPAN
class=EmailStyle21><SPAN
>Thanks
again.
<P class=MsoNormal
><SPAN
class=EmailStyle21><SPAN
>
<P class=MsoNormal
><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<SPAN
>
<P class=MsoNormal
><FONT
face="Times New Roman" color=black size=3><SPAN
> <FONT
color=black><SPAN
>
<P class=MsoNormal
><FONT
face="Times New Roman" color=black size=3><SPAN
> <FONT
color=black><SPAN
>
<DIV
>
<P class=MsoNormal
><FONT
face=Arial color=black size=2><SPAN
>----- Original
Message ----- <SPAN
>
<DIV
>
<P class=MsoNormal
><FONT
face=Arial color=black size=2><SPAN
>
From:<FONT face=Arial
color=black size=2><SPAN
> <A
title=uhehs@xxxxxxxx href="">uhehs@xxxxxxxx
<SPAN
>
<P class=MsoNormal
><FONT
face=Arial color=black size=2><SPAN
> <FONT
face=Arial color=black size=2><SPAN
>
<DIV
>
<P class=MsoNormal
><FONT
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
><FONT
face=Arial color=black size=2><SPAN
>Sent:<FONT
face=Arial color=black size=2><SPAN
> Thursday, April
10, 2003 7:29 PM<SPAN
>
<P class=MsoNormal
><FONT
face=Arial color=black size=2><SPAN
>Subject:<FONT
face=Arial color=black size=2><SPAN
> RE:
[Metastockusers] Re: Logarithmic Scaling/Arithmetic
Scaling<SPAN
>
<P class=MsoNormal
><FONT
face="Times New Roman" color=black size=3><SPAN
> <FONT
color=black><SPAN
>
<P class=MsoNormal
><SPAN
class=EmailStyle20><SPAN
>Thank
you Harold.
<P class=MsoNormal
><SPAN
class=EmailStyle20><SPAN
>
<P class=MsoNormal
><SPAN
class=EmailStyle20><SPAN
>Always
something simple, isn’t it?!
<P class=MsoNormal
><SPAN
class=EmailStyle20><SPAN
>
<P class=MsoNormal
><SPAN
class=EmailStyle20><SPAN
>I
read that using Logarithmic Scaling was the best option, what do you
think?
<P class=MsoNormal
><SPAN
class=EmailStyle20><SPAN
> <FONT
color=black><SPAN
>
<P class=MsoNormal
><FONT
face=Arial color=black size=2><SPAN
>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
color=black><SPAN
>
<P class=MsoNormal
><FONT
face="Times New Roman" color=black size=3><SPAN
> <FONT
color=black><SPAN
>
<P class=MsoNormal
><FONT
face="Times New Roman" color=black size=3><SPAN
>Logarithmic (Percentage) Scaling<SPAN
class=EmailStyle20><SPAN
>
<P
><FONT
face=Arial color=black size=2><SPAN
>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
cellPadding=0 width="127%" border=0>
<TD
>
<TABLE
cellPadding=0 width=400 border=0>
<TD
>
<FONT
face="Times New Roman" color=black size=3><SPAN
><IMG class=shape
height=0
src="png00012.png" width=0 v:src =
"" v:dpi = "96" width = "1"
height = "1">
<IMG height=208
src="jpg00139.jpg" width=360 border=0
v:shapes="_x0000_i1025">Arithmetic Scaling
<SPAN
>
<TD
>
<FONT
face="Times New Roman" color=black size=3><SPAN
><IMG class=shape
height=0
src="png00013.png" width=0 v:src =
"" v:dpi = "96" width = "1"
height = "1">
<IMG height=208
src="jpg00140.jpg" width=360 border=0
v:shapes="_x0000_i1026">Logarithmic
Scaling<SPAN
>
<FONT face="Times New Roman" color=black
size=3><SPAN
>
<DIV
>
<P
><FONT
face=Arial color=black size=2><SPAN
>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
><FONT
face=Arial color=black size=2><SPAN
>
<P class=MsoNormal
><FONT
face="Times New Roman" color=black size=3><SPAN
> <FONT
color=black><SPAN
>
<P class=MsoNormal
><FONT
face="Times New Roman" color=black size=3><SPAN
><BR
><BR
><FONT
color=black><SPAN
>
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