Linear Price Scale

AAA

DEFINITION of 'Linear Price Scale'

A type of scale used on a chart that is plotted in such a way that the values on the scale are spaced equidistantly. Each unit change is represented by the same vertical distance on the chart, regardless of what price level the asset is at when the change occurs. This price scale is mainly used in short-term trading, and it is often used by traders of commodity futures. Contrast this to "logarithmic price scale".

Linear Price Scale

INVESTOPEDIA EXPLAINS 'Linear Price Scale'

A linear price scale is easy to identify because it is evenly spaced up the side of the chart. For example, a linear scale disregards the fact that a $5 move is more substantial when the price of an asset is $10 than when the price of the asset is $50. The price movement that is plotted on the chart is represented as being the same distance on the scale, even though the earlier $5 increase is equal to a 50% increase, while the latter is only a 10% increase.

RELATED TERMS
  1. Nonlinearity

    A relationship which cannot be explained as a linear combination ...
  2. Chartist

    An individual who uses charts or graphs of a security's historical ...
  3. Commodity

    1. A basic good used in commerce that is interchangeable with ...
  4. Logarithmic Price Scale

    A type of scale used on a chart that is plotted in such a way ...
  5. Trend Analysis

    An aspect of technical analysis that tries to predict the future ...
  6. Candlestick

    A chart that displays the high, low, opening and closing prices ...
RELATED FAQS
  1. What is the difference between a logarithmic price scale and a linear one?

    The interpretation of a stock chart can vary among different traders depending on the type of price scale used when viewing ...
Related Articles
  1. Active Trading Fundamentals

    Charting Your Way To Better Returns

    Learn about the powerful hybrid techniques that take advantage of both technical and fundamental analysis.
  2. Forex Education

    An Introduction To J-Charting

    Learn about a technical tool that's based on the view that markets are energetic systems.
  3. Charts & Patterns

    Why These Are 2015's Most-Promising Bank Stocks

    Which bank stocks should offer the best bang for your buck in 2015? Possibly these, so read on.
  4. Chart Advisor

    Trade Healthcare Providers with this ETF

    In good times and bad times one of the best sectors for retail investors to look into is the healthcare providers. Here's an ETF to consider.
  5. Fundamental Analysis

    Is Apple's Stock Over Valued Or Undervalued?

    Despite several drawbacks, the CAPM gives an overview of the level of return that investors should expect for bearing only systematic risk. Applying Apple, we get annual expected return of about ...
  6. Trading Strategies

    Trading On The Psychology Of Round Numbers

    Price action around big round numbers, like 10, 100 and 1000 set up special trading opportunities that take advantage of shifting crowd psychology.
  7. Options & Futures

    Give Yourself More Options With Real Estate Options

    Real estate options have many benefits, including a smaller initial capital requirement.
  8. Chart Advisor

    Commodity Traders Are Using Momentum To Profit From These Stocks

    Active traders are drawn to momentum strategies. These momentum winners of 2015 are worth a trader's second look.
  9. Trading Strategies

    How To Make The Most of Fibonacci Grids

    Build your Fibonacci skills by finding the longest price swing on your chart of interest and placing a grid over the trend. Repeat at shorter intervals.
  10. Trading Strategies

    Day Trading: Top Scenarios To Take Profits

    Three ways to take profits while day trading, based on price movement and what the asset is doing that day.

You May Also Like

Hot Definitions
  1. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  2. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  3. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  4. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
  5. Law Of Supply

    A microeconomic law stating that, all other factors being equal, as the price of a good or service increases, the quantity ...
  6. Investment Grade

    A rating that indicates that a municipal or corporate bond has a relatively low risk of default. Bond rating firms, such ...
Trading Center