Logarithmic vs Linear Charts: What’s the Difference in Trading Analysis?

Different traders can look at the same place on the bitcoin chart and come up with two totally different views. One sees it breaking a trend line, while the other sees it continuing a healthy bull market. Surprisingly the two of them can both be right; they are just using a different scale on their charts. No matter if you trade Forex, indices, commodities, stocks, or cryptocurrencies, how price movements are viewed will greatly affect how the trader interprets information regarding an asset. A trader may come to two completely different conclusions based on using one trader’s linear charts versus another trader’s logarithmic charts, even though they are looking at the same asset. Procedurally, understanding whether to utilize logarithmic vs linear charts is not just a nuance, but a tool to increase the accuracy of trend analysis, risk profiles, and support and resistance zones, along with long-term market projection.

This guide provides an overview of both how logarithmic and linear charts work, when to apply each in trading, and how to integrate both types of charts within your professional trading plan.

What Is a Linear Chart in Trading?

A linear chart, or arithmetic chart, plots the distance from the point of conception to the point of sale for all price increments equally separated. To illustrate, a price increase from 10-20 and from 100-110 would occupy the same distance on the chart.

Therefore, each $10 price increment is displayed the same on the chart regardless of where it originated. The linear chart is the default for all trading platforms. A stock can be an example of how an increase of $10 is not the same for an increase of 100% or 10%.

When using a linear chart both of these percentages will be equal at a $10 increase on the chart, because both moved from $10 to $20 or from $100 to $110. However the effect on the market would have a much larger impact.

Linear Price Scale

Linear price (also called Arithmetic Price Scale) is a plot of an asset’s price or value over time plotted as equal units from the Y-axis (equidistant) of price increase or decrease in price each of which would have been a $1, €1, or figure point respectively as opposed to being considered differently for every dollar amount/different value of the asset.

For example: A price increase of a stock from $100.00 to $110.00 will measure the same size as a price increase of $1,000.00 to $1,010.00 respectively because both price increases represent the same amount ($10.00) of price increase across the respective price ranges.

Due to their simple representation of changes in price, linear charts are popular among day traders because they also allow for easy evaluation of present market fluctuations.

In situations where the changes in value from percentage to absolute may be small, arithmetic scales will frequently contain all the information a trader needs to make a decision.

Advantages and Disadvantages of Linear Charts

The pros of using linear charting include:

• Simple to use and understand for beginners.
• Suitable for short term trades.
• Great for accurate short term price analysis.
• Best for day trading and scalping.
• Provides a clear representation of near term market price changes.

The cons of linear charting are:

• Distorts longer term trends.
• Exaggerates the movement of price over a short period of time.
• Not as effective for the analysis of assets with exponential growth.
• Over time the trendline becomes misleading.

What Is a Logarithmic Chart?

A logarithmic chart uses an alternate method of measuring movement by measuring the price movement in percentage changes rather than in absolute price changes. In a logarithmic chart a movement that is equal in percentage will be visually represented by an equal distance visually.

Therefore a 10% move at any price will visually be equal. For example:

$10 → $20 = 100% increase

$100 → $200 = 100% increase

From the above example, you can see both of these examples will visually appear the same because they both had the same percentage increase. Most professional day traders ask to see a logarithmic chart when they analyze any asset that has significantly risen in price over a period of time.

On-Balance Volume (OBV) Indicator

Logarithmic Price Scale

A Logarithmic Price Scale will show the same price as long as they are both the same percentage change. Thus, it is very useful for long-term growth assets such as Bitcoin, Growth Stocks and Large Cap Stock Markets.

What Is the Benefit and Disadvantages of Logarithmic Charting?

One of the biggest advantages of using a log scale will be that it can provide a more meaningful appraisal of price increases or decreases over time because the financial market does not typically change at constant-nautical intervals; it typically changes based on percentage fluctuations.

A trader that is evaluating an asset that has grown hundreds, if not thousands, of percentage points over a lengthy period of time, will typically find more relevance in the use of a logarithmic chart than in a traditional arithmetic chart. The following are some benefits of using logarithmic scaling when evaluating trades:

• Comparative evaluation of past and current market activity.
• Evaluating long-term trends without distortion.
• Determine the relative accuracy of trend channels.
• Evaluating return on investment using percentage returns.
• Recognition of major market cycles.

The cons of using logarithmic charting include:

• Difficult for new traders to use.
• Not beneficial for short term price analysis.
• Not suitable for determining accurate price targets.
• Can be cumbersome to analyse when the percentage of change is small.

Linear vs Logarithmic Charts: The Key Difference

The primary difference between a linear chart and a logarithmic chart is the difference between the scale of movement. Here are some examples of how they differ from one another.

Although both charts represent the same information; they both emphasize different parts of the movement of the price of the asset.

When Should You Use Logarithmic or Linear Scales in Charts?

When deciding on whether to utilize a linear or logarithmic scale for charting purposes, the primary factor that will determine which charting method to utilize will be the length of time that trading activity has occurred and the relative degree of price movement occurring during the same time frame.

Many professional traders frequently alternate between chart types when making their trading decisions so that they have the opportunity to look at two different vantage points. Logarithmic charts tend to be much more efficient for:

• Analyzing price charts that have been in existence for a number of years
• Studying assets that have demonstrated a considerable amount of historical appreciation
• Drawing trendlines across long periods of market cycles

Linear charts tend to work best for:

• Trading inside or on short-term timeframes
• Measuring the precise levels at which prices have traded
• Performing scalping or day-trading type analysis
• Evaluating markets that do not feature a large amount of percentage volatility

When Should Traders Use Linear Charts?

Linear charts are generally best when relatively small changes are occurring in price. Because of this, ideal situations for linear charts would be:

Day Trading in Forex

Traders who do short-term trades focus on very small movements in price. When picking out the movement of price from 1.1000 to 1.1020 in Forex, a trader will be better served to look at a linear scale rather than a log scale, since there won’t be much percentage distortion.

Scalping in Forex

Scalpers look for small movements in price over short periods of time. Since price movement in scalping is very limited, there is not much time for a trader to really know anything at a logarithmic scale.

Range Trading in Forex

Traders who trade inside of a well-defined range, will more easily be able to analyze their trades with a linear scale chart than with a log scale.

Short Term Swing Trading within Forex

Traders who are looking for a short-term analysis will typically have the most success with a linear scale chart when using a few weeks’ worth of data, rather than several years’ worth. A trader who uses any of the various account types will have the ability to conduct short-term analysis using linear scale charts when implementing intraday strategies.

Logarithmic charts become more valuable to traders as they observe price volatility that grows over time.

What Is the CCI Indicator?

When Should Traders Use Logarithmic Charts?

Logarithmic charts are beneficial when:

Long-Term Investing in Forex

Long term-investors studying trends spanning many years will have a more realistic view of growth opportunities.

Cryptocurrency Market

Cryptocurrencies tend to have explosive rates of return. For example:

$1,000 to $10,000

$10,000 to $100,000

Will yield the same return (1000%), but the difference in price between the two is massive. Logarithmic charts will depict that accurately.

Stock Market Investing

Many companies will have increased their value hundreds or thousands of percentage points over time. Using linear scaling, you could be misled by the current price movements, while ignoring their historical growth.

Commodity Super Cycles

Commodities have long-term cycles that have occurred over many years and have exhibited dramatic percentage increases over time. Logarithmic charts assist traders in determining the true direction of their commodity trends.

When Not to Use a Logarithmic Chart

Even though logarithmic price charts provide a number of benefits, they are not necessarily the best type of price chart to use for every trading circumstance. There are several situations where logarithmic price scales are not appropriate:

• Trading in very short-term market time frames.
• Evaluating price action in markets with very little price fluctuation.
• Setting definite price targets for assets.
• Scalping (trading small price movements).

An example of this would be a Forex trader trading on a five-minute timeframe. In this case, logarithmic scaling would not provide him any additional insight regarding his overall trade decisions, because dollar amounts used to calculate logarithmic ratios are generally too small to provide any analysis advantage.

For this reason, traditional linear price charts would provide a cleaner and more accurate picture of the underlying price action.

Why Chart Scaling Matters in Technical Analysis

There is a long-held belief among traders that scaling charts is just a matter of personal preference. For example, a trendline on a linear scale may look like it broke, but on a log scale, it may still be intact.

This small difference can make a huge impact on a trader’s decision. However, scaling on charts will also change:

• The placement of trendlines
• The identification of support and resistance levels
• How you identify patterns
• How you determine breakout levels
• The way you look at the ratio of profits to losses vs. risk
• How you forecast the long-term movement of the markets

How Logarithmic Charts Improve Trendline Accuracy

One often overlooked area of technical analysis is the effect chart scaling can have on the placement of trendlines. Most of us will grow at some compound rate, rather than at a fixed numerical rate.

Many traders are surprised to discover that a trendline they believed was broken suddenly looks perfectly intact after switching from a linear chart to a logarithmic one. Assets such as Bitcoin, gold, major stock indices, and high-growth technology stocks have historically exhibited percentage-based growth patterns, making logarithmic scaling particularly useful for long-term trend analysis.

Have all displayed percentage-based growth behavior. Logarithmic charts allow you to line up the actual trend lines with how fast the trend is increasing. If you were a professional analyst you would typically switch to logarithmic scale prior to drawing trend lines or extending a trend channel over many years.

Support and Resistance Levels on Linear and Log Charts

Support and resistance levels are different based on the type of chart. A price level on a linear chart is represented by a fixed price (e.g. EUR/USD support price at 1.0800, Gold resistance price at $3500).

Whereas support or resistance levels will show percentage movement and trend structure for long-term traders using a logarithmic chart. Therefore, support and resistance levels on a logarithmic chart are normally more accurate for long-term investors to predict future movement than on linear charts.

The Impact on Chart Patterns

Technical trading patterns will look different depending on the chart scale (i.e. ascending triangles, descending triangles, wedges, channels, head and shoulders, cup and handle). Patterns can be cleaner and structures can be clearer to see on a logarithmic chart, particularly in very volatile markets (i.e. cryptocurrencies and high-growth stock markets).

Market psychology is also significantly affected by the percentage change of gains or losses in an asset. Take the following examples of price gains from the respective assets.

Logarithmic Charts and Market Psychology

Market psychology can be understood better when shown on logarithmic chart scales, rather than through linear chart scales.

Common Mistakes Traders Make When Using Linear Charts

Ignoring percentage growth metrics, and utilizing anatomies deformed by historical data on a linear scale. As a result, angle of slopes on trendlines may be affected as well as peaks and valleys in the price of an asset.

Misreading momentum metrics. Recent price action may appear to be more powerful than it is; also, using linear scaling will increase the perceived strength of breakouts that are occurring within rapidly increasing assets. Errors can lead to poor entries and exits for a trader.

Do professional traders prefer to use logarithmic or linear charts? The answer depends on the style of trading being pursued.

Short-term professionals may prefer to use linear charting, as they are generally looking for immediate price movements. Institutional analysts will typically utilize a logarithmic scale when analyzing:

• Equity markets
• Macroeconomic trends or indicators
• Long-term investments
• Raw materials or cycles

Do Professional Traders Prefer Logarithmic Charts?

Many hedge funds use a combination of both types of charting to achieve their objectives. There is no one chart format that will be considered superior; however, the best traders understand when to use a given type of chart depending on the market context.

Generally, the percentage change per foreign exchange market is less than that of a stock or a cryptocurrency.

Forex traders can use an Economic Calendar with chart analysis to help in anticipating volatility from major economic events. In addition to using charts, professional traders also depend on:

• Technical Indicators
• Market Sentiment
• Fundamentals
• Risk Management
• Economic Data

When used with free trading signals, traders will receive confirmation of a trading setup before they establish a position and thus will develop a more complete framework for trading decisions.

How Chart Scaling Can Affect Risk Management

Most traders believe that chart scaling only alters the appearance of the chart. However, in reality, the scale of the chart can also affect risk management. For instance, a trader using a linear scale to analyze the long-term price chart of a stock could view a trendline breakdown and exit the position too early due to their analysis of a linear scaled chart.

Whereas, if they had viewed the same chart on a log scale, the same trendline breakdown would not have presented a trading opportunity.

When traders understand chart scaling, they can avoid reactive behaviour to visual distortions and concentrate on the true structural nature of the marketplace. The following could be impacted by this type of distinction:

• Stop-Loss Setting
• Position Size
• Risk/Reward Calculation
• Duration of Trade
• Allocation Decisions

How Forex Traders Should Choose Between Log and Linear Charts

The way that the price of Bitcoin has changed indicates the importance of the logarithmic scale. The price of both Bitcoin & Ethereum has risen a lot by percentage points. Using a linear chart, the following may happen:

• Early history gets squished down
• Long-term trends look distorted
• Recent volatility appears to be exaggerated, etc.

Using a logarithmic chart gives you a better idea of how well the market is growing. In general, for crypto prices that go back at least several years, most traders prefer to use the logarithmic scale for their price analysis instead of the linear scale.

Combining Chart Analysis with Trading Signals

Even though chart scaling offers context to the market, it should not be used on its own. A successful trader will normally use chart analysis with additional confirmation methods before executing a trade.

Trading signals help to confirm trade signal observations can be made by both Logarithmic and Linear Charts:

• Potential continuation of trend opportunity,
• Areas where price may reverse,
• Shifts in momentum,
• Confirmation of breakout,
• High-probability entry point.

An example of a trader identifying an uptrend in a long-term log chart, and using trading signals to establish the optimal entry point within the long-term trend. By using multiple approaches, this reduces the reliance on a single analytical method, resulting in better overall trading decisions.

Why Professional Traders Switch Between Both Chart Types

Traders with experience often do not stick with just one kind of chart to make trading decisions. A typical process that traders use to analyze markets is to look at a log chart first in order to see where the larger market trend is headed as well as the major areas of support/resistance.

Once they understand the larger picture, they will switch to a linear chart in order to more accurately identify entry and exit points as well as where their risk will be located. By utilizing both types of charts, professional traders are able to use both charts together to limit their risk of decision-making based on only one view of the market.

Therefore, instead of asking which chart is better than another; professional traders directly ask what type of chart would best fit their specific needs with respect to making additional decisions.

How Anti-Margin Call Protection Supports Long-Term Trading Strategies

To support long-term trading strategies, anti-margin call protection will assist in providing additional account stability during volatile markets at the time of a long-term trader’s analysis of price action on logarithmic charts as the trader maintains a position on longer-term cycles.

In using their analysis with proper chart analysis, traders can focus on the long-term market structure while ignoring the insignificant price fluctuations.

Which Chart Type Is Better for Cryptocurrency Trading?

It is likely that cryptocurrency’s price action has consistently proven itself as a leading candidate for logarithmic analysis, due to its extreme historical volatility, combined with its accelerated growth rates, over time.

In the history of Bitcoin, it started around under 1 dollar to become valued at tens of thousands. On a linear scale charting Bitcoin’s price movement, the early prices have virtually disappeared as price goes up.

This makes it difficult to examine past price cycles to find a pattern that has been repeating. The use of logarithmic charts allows traders to:

• Compare bull markets from one year to another,
• Understand the long-term support and resistance areas of the market,
• Determine with greater clarity where the tops and bottoms of cycles are,
• Analyze how the market behaves on the basis of percentage change.

Although short-term traders may prefer using linear charts for analysis of daily fluctuations in price and for pinpointing entries, many seasoned cryptocurrency traders use logarithmic charts for macro-type analysis, then switch to linear charts to execute trades.

If you’ve ever looked at a long-term Bitcoin chart and wondered why the early years seem almost invisible, the chart scale is usually the reason.

Bitcoin Log Chart vs Linear Chart, A Real-World Example

The easiest way to understand what the difference is between a Logarithmic Chart and a Linear Chart is by looking back in time at Bitcoin’s Historical Price Chart. Using a simplified price progression chart:

A major benefit to using logarithmic charts is that each growth cycle is visible on the chart because of how the percentage growth rather than the absolute price has been applied to the chart.

This allows traders to better compare the cycles of the marketplace, identify repeating patterns, and assess whether the current price action is an anomaly or part of the larger long-term trend.

This is why many analysts of cryptocurrencies utilize log scaling when studying the long-term market structure of Bitcoin.

Best Practice: Use Both Chart Types

Because of the nature of the two types of charts that are used in the analysis of crypto, many experienced traders will use both types of charts to analyze the prices of crypto in different ways.

The advantage of using both charts is clear. Here is a possible example of an efficient work-flow:

• Use the log chart to find the primary trend.
• Locate major support and resistance levels.
• Switch to linear price for precise pricing on entry or exit.
• Use indicators, sentiment and other signals to confirm your potential trade.

Choose the Right Perspective for Better Trading Decisions

Determining the difference between logarithmic charts and linear charts is not about ‘who wins’. It is about evaluating the correct viewpoint to use when assessing any particular market activity.

Great traders know the best times to utilize each of these types of charts and how to use chart scaling within a larger analytical method. At STP Trading, you will find all of the advantages typically associated with professional trading conditions; very different types of accounts, free trade signals, more advanced ways of managing risk (such as Anti Margin Call Protection), and exceptional tools for the purpose of performing market analysis (like the Economic Calendar).

When combined with a more complete understanding of chart scaling, you will be better positioned to make more educated trading decisions and ultimately to have a stronger foundation for a successful trading career.

Whether you prefer logarithmic charts for long-term market analysis or linear charts for short-term execution, understanding when to use each perspective can significantly improve your decision-making process.

By combining proper chart scaling with professional tools such as trading signals, economic calendars, and advanced risk-management features, traders can build a more complete framework for navigating today’s markets.

Open an account with STP Trading and experience professional-grade trading tools designed for both beginner and advanced traders.

FAQ about Logarithmic vs Linear Charts

Are logarithmic charts better for Bitcoin and cryptocurrencies?

Yes, because each cryptocurrency can increase or decrease by an inordinate amount, the use of a logarithmic chart for determining long-term trends may be preferable.

Do logarithmic charts present different chart patterns compared to linear charts?

Yes, chart patterns, trendlines, and channels may appear to be different for the same instrument due to the fact that logarithmic charts adjust based on the percentage change from previous prices rather than the absolute price change from the previous prices.

Which type of chart would be the most useful for a forex trader?

When entering into trades for the currency market on an intraday basis it is typically sufficient to rely on linear charts; however, for analyzing long-term trends in the currency market logarithmic charts may provide better insight into those trends.

Is it possible to switch between log and linear charts on trading systems?

The majority of today’s trading systems have a feature that permits traders to change between chart types as quickly as they would like for a quick side by side comparison of how each chart shows the market structure from a variety of perspectives.