Ask Colin

Which is better, log, semi-log or arithmetic charts?

Your question really begs another question - better for what? However, lets try to deal with the very general question you have asked.

Your full question:
I have never seen anyone use log charts for technical analysis. I guess they have, but it will have been a fairly specialised application. Most charts have time as the X axis. I am not sure that a log scaling of time would be useful. However, where price and say volume were the two axes, then a log chart may be of use.

My Response:
A logarithmic chart would have log scale for both the time and price axes as you described a semi-log chart.

A semi-log chart has a linear time scale and a logarithmic price scale. Hence "semi-log" because it is only half logaritmic scale.

Semi-log charts are the standard form for bar charts and line charts. Linear charts should only be used for very short term work, where the price range over the period of the chart is not great in percentage terms. Linear charts should never be used for trend line work, again unless the price range of the chart is quite small.

Arithmetic or linear charts are generally used for candlestick charting, though I see no logic to differentiate them from bar charts. The same principle is involved. Semi-log charts should be used. However, against that, candlestick charts are really primarily useful for short term work and because the dynamic price range would tend to be small in that case, linear charts may be OK most of the time.

Linear charts are generally used for market profile and for point and figure charts, although in the latter case, the Chartcraft system uses a form of semi-log scaling.

linear charts are used for swing and Kagi charts and there is no reason why semi-log charts would be useful, considering the way they are used.

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