Deciding whether to look at adjusted versus unadjusted prices on a chart depends on your objective.

Here’s when to use each: 

Adjusted Prices

Adjusted prices factor in corporate actions like dividends, stock splits, and mergers. These are helpful when you want to focus on the true performance of a stock you own: 

• For long-term analysis: Adjusted prices reflect returns more accurately, especially if you’re holding a stock through dividends or splits. 
• Evaluating total returns: Use adjusted charts to see the real impact of all corporate actions on your portfolio. 
• Comparing performance: Adjusted prices help compare two stocks fairly since splits or dividends won’t skew the visual trends. 

Unadjusted Prices 

Unadjusted prices reflect the stock’s price as traded on that specific day without factoring in corporate actions. These are useful when you need to understand raw market prices: 

• For historical trading prices: If you want to see the actual prices at which the stock was traded on specific dates. 
• Analyzing short-term price action: Intraday or short-term traders often rely on unadjusted prices to understand immediate market behavior.  
• • Technical traders use unadjusted prices to identify support and resistance levels and do not mentally adjust for dividends when assessing these levels. 
• Evaluating liquidity: To assess the volume and market behavior at specific historical price points. 

The TradeSmith Way 

TradeSmith adjusts for dividends by default. This setting is on the Asset Details page (formally known as the Stock Analyzer or Position Card page), under the Position Details tab.

Please remember that when you DON’T adjust for dividends and other corporate actions, it may affect when you are stopped out, especially if the security has a high dividend yield.  

Why does displaying “unadjusted” prices sometimes change the health status of a security? 

When you switch to “unadjusted” prices, you view the stock's raw historical prices, without accounting for corporate actions such as dividends or stock splits. This can affect the appearance of price movements, trailing stops, and indicators such as the Volatility Quotient (VQ).

Here’s why: 

• Dividends: Suppose a stock trades at $100 and pays a $5 dividend. On an unadjusted chart, the price will drop to $95, even though this isn’t a market-driven loss. This drop could incorrectly trigger a trailing stop or the VQ, even though the stock’s value hasn’t changed. 
• Stock Splits: A stock split reduces the historical prices displayed on the chart. For instance, a 2-for-1 split halves the stock price, which might alter the appearance of trailing stops and potentially change the health status. 
• The Health Indicator, both long and short-term, can be similarly affected by unadjusted prices. If the chart displays these artificial drops, it may lead to changes in the security’s health status. 

Using adjusted prices ensures that corporate actions like dividends and splits are accounted for, providing a more accurate representation of the stock’s price movements and reducing the risk of premature stops or status changes. 

Key Takeaway 

• If you’re looking at investment returns, use adjusted prices. 
• If you’re examining trading prices or market action, use unadjusted prices.