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Chart scaling arithmentic and log chart in technical analysis

Chart scaling is one of the important topic in chart analysis. Main difference between arithmetic and log chart is on Y axis which represents price movement of a stock. In arithmetic chart each point is placed at equal distance. In logarithmic chart it is placed based on percentage of price movement.

You can either select arithmetic or log scaling in your chart based on time frame of analysis. Normally when we analyse chart for long term investing, we use log scale charts. This will give clear idea of price movements when we analyse charts spanning years. We can also switch between log and arithmetic charts for detailed analysis. 

Traders normally prefer arithmetic charts for analysis. Because in a short period of time there wont be much difference between a log chart and arithmetic chart.

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When analysisng a long term chart, its difficult to see price advances in early stages. a move from 10 to 20 and 500 to 1000 is same length movement in percentage term ie 50 percent. But in normal arithmetic chart a first move is only of 10 points and second move is 500 points. So first move wont be clearly visible in arithmetic chart. But in logarithmic chart its adjusted which makes easier to analyse price in initial stages also.

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