Sigh. Those figures, why doesn't the Y-axis start at zero?
Financial types are only concerned with the % change. 'Zero' in the financial world means 0% change, i.e., the same price as it started with. A chart with a flexible axis will look identical when evaluated as a % change or as an absolute value, giving it a tremendous amount of utility when looking at the price action relative to various other things, indexes, pairs, sectors, etc...
Yes, that's the point. If you let the Y-axis begin at zero, then you can intuitively read the change-percentages right from the graph!
Let's say something is worth $10, and tomorrow it's $11. That's a 10% increase in a day. Now suppose you let the graph start at $10 instead of at $0. You only see the $1 increase, and you have no clue about the change in percentage.
You don't have to take my word for it. Every candlestick chart you will ever see uses a flexible axis unless the time series is expanded to include a period of time when it was at zero.
And its not because they never read Tufte. :-)
For example:
> Yesterday, Bitcoin was just a few dollars away from dropping below $10,000, but it bounced back around $11k, a 15% drop from two days before.
That 15% refers to the total of around $10,000 and not to some change!
The text is full of these examples.
(The fact that those candle-stick diagrams don't start at zero is because traders use technical analysis which indeed doesn't care about absolute values, but imho this shows how crazy it all is.)
A metaphor might be if you listen in on a conversation between two experts and they are using jargon that you know is technically imprecise. If you say "that's not really what that means" then the response is usually "bugger off because we know what it means and there's a good reason we say it like that and we're not changing it just because you are listening."
But could you explain that in this particular case?
For instance, let's say bitcoin is at $10,000 and it moves a few cents up and down, giving big swings in your non-zero-based graph. Why are those big swings saying anything meaningful to a financial type?
In my graph, the line would be almost flat, and clearly indicates that nothing is really happening (low volatility).
Sure, its helps me to think through these things too. :-)
In your graph, you probably don't mind that its almost flat, but if I am someone who makes money by trading every day, I'm interested in very small moves, a couple of pennies, maybe 0.5% over the course of a day. And that's _all_ I'm interested in. Where is the price over the last few days and how does that compare to the price of some other thing?
Knowing the relationship of the current price to zero is really not important because it a) has never been at zero, b) is not going to go to zero, and c) zero is meaningless in pricing anyway.
That last one is kind of unintuitive. You can't buy or sell a share at a $0 price. A $0 price implies that there are no buyers or sellers. No buyers or sellers means means the price is undefined, not $0. No matter how low the price gets, it can never be assumed to trade at $0. No stock has traded at a $0 price (even in bankruptcy there are always some value to the shares right up until they are liquidated and cease to exist). No stock has ever opened at $0, they IPO in the $20-30 range (or somewhere non-zero anyway).
So if zero doesn't mean anything, then you have to say, what should the minimum be? Well, you can say $0.01, but that's just as arbitrary. Assets are infinitely divisible in theory, and lots of trades are made at lower denomination that the currency, take the $0.000000008 / share SEC fee.
If any choice is going to be arbitrary, then you have to go back to the intention, which is to compare current price movements to recent price movements to understand what's happening, so just make sure your chart has all the recent price movements and then add +/- something like 10% on either side to give some padding and emphasize breakouts... a.k.a a flexible axis.
In this particular case, I suppose it is the author's intention. If they wanted to emphasize the volatility of recent movements, a flexible axis is right for that. If they wanted to minimize the volatility, a fixed axis starting at $0 is better.
But, objectively, there is no reason to _insist_ on starting at $0.
But how does the trader know it's (on the order of) 0.5% by looking at the graph, if it doesn't start at zero? Now they have to look at the absolute value on the Y-axis, estimate the fluctuation in the graph and divide.
PS: appreciate your lengthy reply.
Plus, most professionals aren't going to ever look at one particular stock, like an Apple trader will have Apple, a tech sector ETF and the S&P500. As soon as you add a second series the y-axis _has_ to revert to a percentage change. They'll all start at the same point, which will be labeled 0%, and then diverge.
People don't read these days. :-(
"In general, in a time-series, use a baseline that shows the data not the zero point." - Edward Tufte.
It's a detail trade-off. Starting at zero helps the uninformed, but will obscure details.
Starting at zero helps the well dressed, but would obscure the person's head back above 10,000?