Stock Price Charts

Stock Price Charts?

What is the purpose of having the price charted on logarthmic paper??

Public Comments

1. For those who are serious about the stock market. Those who invest, want to compare stocks!
2. I used it to analyze my mistake, or sometime look for a clue when to hold or fold.
3. Logarithmic charts are used for long-term charts. Let's take the Dow Jones Industrial Average as an example. It's currently trading around 11000 or so. If we have a look at the Dow back to say 1940 (the dow was at 150), the start of the chart looks like almost a flat line from 1940 to 1955. The Dow actually rows to almost 500 in 1955. The problem with a linear scale is that takes the maximum levels into account. So a rise from 150 to 500 (a three folder increase) looks insignificant compared to the period between 1990 (dow was around 2700) to 1998 (when the dow got to over 9000, yet they are both dramatic movements. So by using a log/semilog scale we can compare the relative price movements rather than the physical point changes. So, a 3 fold increase looks the same whether the it's from 150 to 450 or 2700 to 8100. See the sources below for charts of the Dow showing the two different pricing scales.