Discover the key differences between logarithmic and linear scales in trading charts. Learn when to use each scale, how they impact technical analysis, and why choosing the right scale can provide clearer insights for short-term and long-term trading strategies.
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What is Logarithmic Scale on TradingView?
A logarithmic scale (or log scale) on TradingView is a chart setting that represents price changes proportionally by percentage, rather than by equal dollar or point increments. Unlike a linear scale, where each price increment is the same size on the y-axis, a log scale adjusts each interval to represent the same percentage change, making it particularly useful for analyzing assets that experience significant price movements over time.
Key Features and Benefits of Using a Logarithmic Scale:
Here are some of the benefits using TradingView Logarithmic Scale.
Proportional Representation of Price Changes:
In a log scale, moving from $10 to $20 (100% increase) and from $100 to $200 (also a 100% increase) will show the same distance on the y-axis, even though the absolute change differs.
This is ideal for assets like cryptocurrencies or tech stocks, which can see price increases by multiples (e.g., from $1 to $100 or $1000+ over time). The log scale makes these changes easier to visualize and compare.
Better Perspective on Long-Term Price Trends:
For long-term charts with large historical data, such as a decade-long price trend, a log scale helps you see early stages of growth alongside more recent price action without distorting smaller moves.
This is particularly valuable in trend analysis, as it reduces the visual compression of early prices that a linear scale might cause in high-growth charts.
Enhanced Technical Analysis:
Many traders prefer the log scale for identifying key levels, support, resistance, and trend lines on assets that grow exponentially. For example, trend lines often align better on log scales for assets in sustained growth phases.
How to Enable Logarithmic Scale on TradingView?
To activate the log scale on TradingView:
Method 01
Look at the bottom right of the chart where you’ll see a button labeled “Log.”
Method 02
You can also switch the chart to Log scale by right clicking on the price scale and selecting “Logarithmic”.
When to Use a Log Scale vs. Linear Scale?
Choosing between a logarithmic (log) scale and a linear scale depends largely on the type of price movement and the timeframe of the asset you’re analyzing. Here’s a breakdown of when each is more suitable:
When to Use a Logarithmic Scale?
Long-Term Analysis:
Log scale is ideal for viewing price changes over long periods, especially when analyzing trends that span years or decades. This helps visualize early price changes proportionally with recent price levels.
Example: A stock that has gone from $10 to $500 over several years would appear with more balance on a log scale than on a linear scale, where the initial growth might look flat compared to recent prices.
Assets with Large Price Swings:
Assets like cryptocurrencies, growth stocks, and commodities that experience exponential growth or large price changes benefit from a log scale. The log scale makes these price movements easier to interpret by presenting percentage changes rather than absolute changes.
Example: Bitcoin, which has gone from a few dollars to tens of thousands, would look more meaningful on a log scale.
Percentage-Based Analysis:
A log scale emphasizes percentage-based changes, which are often more relevant for traders than absolute dollar values, especially in assets with high volatility. This can help identify consistent trends and levels even in assets with significant price increases.
Example: Going from $100 to $200 (100% gain) looks the same as going from $1,000 to $2,000 on a log scale, providing a clearer sense of proportional growth.
Trend Line Consistency:
Many traders find that trend lines, support, resistance, and other technical analysis levels align better on log scale charts for assets that experience sustained growth.
When to Use a Linear Scale?
Short-Term Analysis:
Linear scale is often more appropriate for short-term trading, where percentage-based scaling might not add much value. If price fluctuations are relatively stable or small, a linear scale may make those movements clearer.
Example: Analyzing intraday or short-term moves in the S&P 500, which typically has smaller percentage changes on a daily basis.
Low-Volatility Assets:
For assets with low price variance or those that don’t experience exponential growth, such as some blue-chip stocks or certain forex pairs, a linear scale often provides a more straightforward view.
Example: A stable currency pair like EUR/USD might be better visualized on a linear scale.
Small Price Ranges:
For assets with a narrow price range or limited growth, where absolute changes are relatively small, linear scales can provide a simpler, more direct representation.
Example: A stock that has traded between $10 and $20 for an extended period.
Fib Levels Based on Log Scale
If you’re using a logarithmic (log) scale on the chart, it’s generally advisable to also use the log scale option in the Fibonacci retracement tool on TradingView. This is because the log scale represents price changes in percentages rather than absolute numbers, which can be more relevant for analyzing price movements over large ranges, especially in assets that experience exponential growth or large price swings, such as cryptocurrencies or stocks with high volatility.
Here’s why it’s important to match them:
- Consistency in Scaling: The log scale on a chart shows changes proportionally (percentage-based) rather than in absolute terms, which aligns better with how markets often move over time.
- Fibonacci Levels on Logarithmic Growth: When you use Fibonacci retracement on a log chart without setting it to log scale, the levels may not accurately represent meaningful retracement points for large-scale price changes, potentially leading to misleading analysis.
In TradingView, you can enable this by going to the settings of the Fibonacci tool and selecting the “Fib levels based on log scale” option.
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Summary
- Use Log Scale: For long-term trends, high-volatility assets, exponential growth, or percentage-based analysis.
- Use Linear Scale: For short-term analysis, low-volatility assets, or assets with stable and limited price changes.
Matching the chart scale to the characteristics of the asset and the goals of your analysis can improve the accuracy and clarity of your technical insights.
