Commenting on this post, I asked The Chairman why pros seem to prefer logarithmic—or log—charts over linear charts since they distort my precious chart patterns. His answer: it’s the linear charts that distort.
While he’s absolutely right that log charts like this:
are more accurate than the linear version:
since they better reflect % increases/decreases rather than absolute ($) gains, I’m right that linear works better for smallcraps and microcraps. Two simple reasons:
1. The vast majority of microcrap and smallcrap investors are total morons. They can’t understand it’s infinitely more difficult for a stock to run from $2 to $8 than it is to run from $6 to $12 (400% vs. 100% runup even though both lead to $6/share gains)…they think only in terms of $ gains (to see what they can afford at Costco)
2. When trading these POS stocks, log charts mask how steep multi-day runups like COIN are (since they’re better at showing the long-ter picture)
My trading is based on judging how others—the morons who influence/cause PennyStocking—in my niche think and act, so I’ll keep using these more primitive linear charts…another reason microcrap and smallcrap trading rocks as compared to trading the more scalable/liquid/competitive/tougher aka less predictable niches the big $ prefers.
Tags: charts, Q&A, smallcaps, Supernovas
