These are the key points:
1. Arithmetic scales are useful when the price range
is confined within a relatively tight range.
2. Arithmetic scales are useful for short-term charts
and trading. Price movements (particularly for stocks)
are shown in absolute dollar terms and reflect
movements dollar for dollar.
3. Semi-log scales are useful when the price has moved
significantly, be it over a short or extended time
frame
4. Trend lines tend to match lows better on semi-log
scales.
5. Semi-log scales are useful for long-term charts to
gauge the percentage movements over a long period of
time. Large movements are put into perspective.
6. Stocks and many other securities are judged in
relative terms through the use of ratios such as PE,
Price/Revenues and Price/Book. With this in mind, it
also makes sense to analyze price movements in
percentage terms.
Regards,
AB
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