Analysing long-term trends with Log charts

3 set 2022

1) What's the Log chart?

Before I define a Log chart, consider the chart you use daily: 'The Linear Chart.'

- Most platforms use a linear chart by default. This is most likely why you were unaware of log charts.

2) So, what exactly does a Linear chart mean?

Look at the chart below - The y-axis is divided into 200 equal points ranging from 0 to 3000.
- As a result, any linear chart's y-axis would always be equally separated by 'N' points.

And this is where the issue arises...



3) But I don't see any issue.

Allow me to explain...

- Could you look at this #PIDILITIND chart and tell me the price when it was listed in 1999? No!
- In this chart, can you draw a proper trendline? No!

The reason is because of the price congestion from 2007 to 14...


4) 4 Is there anything else?

- When there is a significant price change in an instrument, it is difficult to analyse it on a linear chart.

- Take a look at this #BTCUSD example. What happened in 2021 (as shown in the red box)?

All of this is due to the equally spaced Y-axis!



5) Now, let's talk about, 'The Log Chart.'

The LOG option is located at the bottom right of your chart. Alternatively, right-click on the Y axis and choose Logarithmic.
You can also convert it to a log chart by pressing the Option + L keys on your keyboard.

Do you notice a difference in the same #PIDILITIND chart? (Reason in the chart)

There you have it!
- A clear price trend is visible. Trends can be identified since listing.




6) When should you use a log/linear scale?

- As you can see, the log/linear scale makes no difference in short-term charts. - If you only trade intraday or in the short term, you can continue to use linear charts.

However, if the price of a cryptocurrency fluctuates dramatically, use log...
If you are a swing/long term trader, you should ALWAYS use a log chart.

- You can properly analyse charts.
- Draw precise trendlines
- Recognize primary trendline and channel reversals

Short-term charts should work well with log!