Logarithmic Scale
Linear vs. Log
A logarithmic (log) scale is a charting method where the vertical axis represents percentage changes rather than absolute price points, making the distance between $10 and $20 equal to the distance between $100 and $200.
Visualizing $10 to $100.
Key Takeaways
- Best for long-term charts (years/decades).
- Best for assets with exponential growth (Bitcoin, Amazon).
- Equal vertical distance = Equal percentage gain.
- Prevents recent price moves from dwarfing history.
- Contrast with "Linear" (Arithmetic) scale.
When to Use Log Scale
If you look at a chart of Amazon from 1997 to 2024 on a **Linear** scale, the first 15 years look like a flat line at $0 because the recent moves are so huge (in dollar terms). On a **Log** scale, the 1990s rally looks just as big as the 2020 rally because both were 1000% gains. Log scales allow you to analyze the *rate of return* accurately over long periods.
FAQs
Linear. For small moves (intraday), the difference is negligible, and linear is more intuitive for reading dollar-value targets.
Yes! A straight trendline on a Log chart is a curved exponential line on a Linear chart. Long-term trendlines are often only valid on Log scales.
The Bottom Line
Logarithmic scales tell the true story of performance. They filter out the distortion of absolute numbers to reveal the percentage reality of growth or decline.
Related Terms
More in Chart Patterns
At a Glance
Key Takeaways
- Best for long-term charts (years/decades).
- Best for assets with exponential growth (Bitcoin, Amazon).
- Equal vertical distance = Equal percentage gain.
- Prevents recent price moves from dwarfing history.