Advanced Chart Analysis: Scaling, Volume, and Comparative Charting Explained

Multi-line charts allow analysts to compare several securities or economic variables across the same time axis. Instead of focusing on one asset in isolation, this method highlights relationships, divergence, correlation, and leadership rotation.

For example:

• Comparing S&P 500, Nasdaq, and Dow Jones reveals internal market strength.
• Comparing gold and the US Dollar Index highlights macro relationships.
• Overlaying sector ETFs identifies capital rotation between industries.

The objective is structural comparison — not absolute price comparison. When viewing multiple lines, the analyst evaluates whether assets trend together, whether divergence is forming, or whether one asset leads another.

However, scaling is critical. If price magnitudes differ dramatically, interpretation can be distorted. In such cases, normalization or logarithmic scaling may be necessary.

Best practices:

• Focus on directional alignment
• Avoid cluttering with too many overlays
• Normalize when comparing different magnitudes
• Use log scale for long-term relative performance

Multi-line charts shift analysis from isolated price movement to relational structure.

When two variables trade at very different levels, plotting them on a single y-axis compresses one series into near invisibility. A dual-axis chart solves this by assigning one variable to the left vertical axis and the other to the right.

Common use cases include:

• Equity index vs bond yield
• Stock price vs macroeconomic data
• Commodity price vs currency index

This preserves visual clarity for both series. However, dual axes must be used responsibly. Manipulating scale ranges can artificially imply correlation. Overlapping lines do not guarantee statistical relationship.

Advantages:

• Preserves readability
• Allows cross-asset comparison
• Maintains proportional emphasis

Risks:

• Can exaggerate relationships
• May visually imply correlation
• Requires clear labeling

Dual-axis charts are powerful analytical tools when scaling integrity is maintained.

Choosing between arithmetic and logarithmic scaling is one of the most important decisions in chart construction.

An arithmetic (linear) scale spaces price levels evenly. A $10 move appears identical whether price is $20 or $200. This works well for short-term analysis where absolute price movement matters.

A logarithmic scale spaces values by percentage change. Equal vertical distance represents equal percentage movement.

Example:

• $10 → $20 (100% gain)
• $50 → $100 (100% gain)

On a log scale, both appear identical in height. On a linear scale, they do not.

When to use arithmetic scale:

• Short-term trading
• Range-bound markets
• Stable price environments

When to use log scale:

• Multi-year charts
• Exponential growth stocks
• Large percentage movements
• Long-term structural analysis

For long-horizon analysis, log scale more accurately reflects investor return and compounding growth.

Always verify which scale is active before drawing conclusions.

Volume represents participation. Price shows direction — volume shows conviction.

Volume is typically displayed beneath price as vertical bars. Rising price with rising volume suggests strong participation. Rising price with declining volume may signal weakening momentum.

Common interpretations:

• Rising price + rising volume → trend strength
• Rising price + falling volume → potential fragility
• High volume at resistance → possible distribution
• Volume spike at breakout → confirmation

Volume does not independently define trend direction. It confirms or questions existing structure.

Guidelines:

• Compare current volume to historical averages
• Identify abnormal spikes
• Watch for divergence between price and volume
• Use volume as supporting evidence

Without volume, price lacks participation context.

Equivolume charts combine price and volume into a single graphical structure. Instead of fixed-width candles, each bar’s width reflects trading volume while height reflects price range.

High-volume sessions appear wide. Low-volume sessions appear narrow.

This format emphasizes participation intensity without requiring a separate volume pane.

Advantages:

• Instantly highlights heavy trading days
• Integrates price and volume visually
• Useful during accumulation or distribution

Limitations:

• Distorts time spacing
• Less intuitive for beginners
• Harder to compare equal time intervals

Equivolume charts are best used as supplementary tools rather than primary analysis formats.

Traditional charts use fixed time intervals. Volume-based charts replace time with activity. Each candle represents a fixed amount of traded volume rather than a fixed duration.

When trading activity is high, candles form rapidly. When activity is low, fewer candles appear.

Advantages:

• Emphasizes institutional participation
• Highlights momentum bursts
• Reduces low-activity noise
• Useful for intraday traders

Volume-based charts reveal patterns that time-based charts may obscure during high-volatility sessions.

They reinforce an important principle: participation often matters more than clock time.