Lesson 13 — Linear vs Logarithmic Charts
Learn how two chart scales can display the same price movement differently.
Why Does Chart Scale Matter?
A price chart is not only about the data. The way that data is displayed can change how a long-term price movement looks.
What Is a Linear Chart?
A linear, or arithmetic, price scale gives the same amount of vertical space to the same dollar change.
How Linear Spacing Works
On a linear scale, the distance from $10 to $20 is the same as the distance from $80 to $90.
What Is a Logarithmic Chart?
A logarithmic, or percentage, scale focuses on the relative change in price rather than simply the dollar change.
The chart gives similar visual spacing to similar percentage movements.
Why Percentage Change Matters
Both moves doubled the share price. A logarithmic chart treats these percentage changes as equivalent even though the dollar changes are different.
Same Data, Different Appearance
Imagine a share rising from $10 to $100 over many years. The price data has not changed, but the chart can look very different depending on the scale.
Visual Comparison
When Is Linear Useful?
Linear charts can be useful when:
• Looking at shorter-term price movements
• Comparing actual dollar price levels
• Studying precise price zones
• Working with markets where absolute price movement is the main focus
When Is Logarithmic Useful?
Logarithmic charts can be particularly useful when:
• Studying long-term price history
• A share has experienced large price changes
• Comparing percentage growth across different periods
• Analysing long-term trends
🇦🇺 Australian Market Example
Imagine an ASX-listed company grows from $5 to $10, then later from $50 to $100.
| Movement | Dollar Change | Percentage Change |
|---|---|---|
| $5 → $10 | +$5 | +100% |
| $50 → $100 | +$50 | +100% |
Don't Confuse Scale With Direction
Changing from linear to logarithmic does not change the underlying price data.
🧠 Chart Detective
A share moves from $10 to $20 and another moves from $50 to $100. Which statement is correct?
Quick Comparison
| Linear | Logarithmic |
|---|---|
| Equal dollar spacing | Equal percentage spacing |
| Useful for price levels | Useful for relative growth |
| Often useful for shorter periods | Often useful for long-term charts |
| Large percentage moves can look distorted visually | Large percentage moves are easier to compare |
Lesson Complete!
You now understand the difference between linear and logarithmic price charts.
Remember:
Linear = dollar movement
Logarithmic = percentage movement
Next: What Is a Market Trend?
When you look at a stock chart, you are not only looking at price—you are also looking at how price is displayed. Two common chart scales are linear and logarithmic.
Both use the same underlying market prices, but they arrange those prices differently on the vertical axis. Understanding the difference is important because the appearance of a long-term trend, breakout or trendline can change depending on the scale you use.
A linear chart focuses on the actual dollar change in price. A logarithmic chart focuses on the percentage change in price.
For example, a move from $10 to $20 is a $10 increase and a 100% gain. A move from $50 to $60 is also a $10 increase, but only a 20% gain. A linear chart treats both $10 movements equally, while a logarithmic chart reflects the much larger percentage increase in the first example.
For Australian investors and traders analysing ASX-listed shares, understanding these two scales becomes particularly useful when studying companies over many years or comparing large price movements.