What type of scale is used for a linear representation of price changes?

A linear representation of price changes utilizes an arithmetic scale. In an arithmetic scale, equal distances on the scale correspond to equal amounts of price change. This approach provides a straightforward view of fluctuations in price, making it easier to visualize and understand movements, especially over a limited range where price changes are relatively uniform.

For instance, if a stock moves from $10 to $20, the distance on the chart between these two points will be the same as the distance between $50 and $60, even though the percentage changes are different; the arithmetic scale aligns with absolute changes rather than percentage changes. This feature is particularly useful for traders who are focused on specific price levels or absolute changes in price, allowing for an intuitive assessment of performance over time.

In contrast, other scales like logarithmic scales are used to represent percentage changes rather than absolute changes, which is not suitable for a linear representation. Hence, the arithmetic scale is the proper choice for depicting linear price changes.