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Do you always use logarithmic stock charts?

Original Question: Are you always looking at log charts or only when you are drawing the clothesline profit targets?


There is no other valid chart type than a log chart to be honest. A straight line on a log chart represents a constant exponential growth (constant percentage growth rate). So when the stock price is trading along a straight line on a log chart, it means that the stock maintains it’s growth. This implies that a log stock chart helps you to easily spot any change in the growth character at a glance. It also comes in handy when you try to relate the price advance with the quarterly earnings and sales growth, both also published as a percentage growth.

Generally speaking the log chart is the tool when you have to work with percentages and handle data which covers orders of magnitude.

The recent pandemic introduced the log chart to a wider audience as the ‘spiky’ non log charts made people freak out. At least those who are not used to look at exponential data. A virus is also spreading in exponential fashion with a specific percentage growth rate expressed by the basic reproduction number.

A log chart allows one to better see the details as the attention-grabbing exponential nature is now visually suppressed.

The same is true for stock charts.


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