The price action in the portion of the chart with brown color seems static. Let’s take the linear chart of Zoom (ZM) above as an example. The situation of underrepresenting price changes that happen when security price is low (compared to the rest of the prices on the chart) and over-representing price changes when the security price is relatively high is the major problem associated with linear chart scaling. This often creates challenges for securities that have multiplied in price. In the price change of $1 to $2, the stock doubled, but in moving from $100 to $101, the stock only gained one percent. What this means is that a price change from $1 to $2 is represented just as the price change from $100 to $101. In other words, a unit precisely stands for a unit. The price spacing is equal, and the reference points along the y-axis ascend in equal increments. It plots price changes in a constant unit value such that any two price positions are equidistant from each other. Linear chart scaling uses an equal value between price positions on the y-axis. But first, let’s find out what linear scaling is. Here, we’ll discuss when to use linear chart scaling and why short-term traders prefer it. Our focus is on how the price axis is scaled. In a price chart, the price is represented on the y-axis, while the time is represented on the x-axis.
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