Procurement Glossary & Terminologies

Glossary / Letter L / Linear Pricing

Linear Pricing

Definition

A charting scale known as a linear (arithmetic) pricing scale is plotted with absolute values evenly spaced apart on the vertical y-axis and is majorly employed by traders. No matter the asset’s price level, when the change occurs, each unit change is represented by the same vertical distance on the chart.

A comparison can be made between the logarithmic and linear scales. Depending on the type of price scale used to examine the data, different traders may read a stock chart differently.

How Linear Price Scales Work

The financial sector frequently uses two types of price scale charts: linear and logarithmic (log) pricing scales. Technical analysts can utilise either type of chart. The charts are all typically produced by software automation. Since they rely on static units that reflect absolute values, linear pricing scale charts are easier to create by hand.

Since the unit value movements in logarithmic charts are often expressed in percentages rather than constants, they typically need sophisticated chart programming. The exact x-axis dates will be used for linear and logarithmic chart charting.

An arithmetic chart is another name for a linear price scale. The chart’s linear price scale does not scale or represent movement with its % change. With each change in unit value equivalent to a constant unit value, the linear price scale shows changes in the price level. Linear pricing scales are simpler to draw manually because each value change on the grid is constant.

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