Price AxisTechnical Analysis
There are two axes for technical charts. The Price Axis measures the price’s distance from zero market value. The Time Axis measures the passage of time measured in periods, transactions or issues traded depending on your chart configuration.
The bottom to top axis (or the “y” axis) is the price of an asset, increasing rising towards the top of the chart. The price axis can be scaled in arithmetic or logarithmic values. The chart’s appearance will change depending on the selection, and each has different benefits and problems.
An arithmetic price axis has equal spacing between each unit of measurement on the chart. A logarithmic price axis has smaller spaces between each unit as the price axis rises. Price action towards the top of the range will appear compressed, and these differences will appear more obvious in charts with large price differences. Most importantly, Trend lines and channels will scale differently on logarithmic charts compared to arithmetic charts. Breaks in trend or channel lines will occur at different points, and price action indicators can appear slightly different.
Many traders use logarithmic scaling on long-term time frames since this presents a more visually accurate portrayal of long term percentage changes in price. This is wholly up to the visual preference of the trader.
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