TradingView Tutorial for Beginners: Understanding When and How to Use Logarithmic Charts

 

As a beginner in the world of trading, one of the most important decisions you'll make is choosing the right scale for your charts. While linear scales are commonly used, logarithmic (log) scales can provide valuable insights into long-term trends and growth patterns. In this TradingView tutorial, we'll explore the benefits of using logarithmic scales and guide you through the process of switching between linear and log scales in TradingView.

Understanding Linear vs. Logarithmic Scales

Linear scales are the default setting in most charting platforms, including TradingView. They display price movements in a straight line, with equal distances between each price point. This makes it easy to visualize short-term fluctuations and compare absolute price differences.On the other hand, logarithmic scales use a logarithmic transformation to display price movements. Instead of equal distances between price points, log scales use proportional distances. This means that a move from $10 to $20 (a 100% increase) will have the same visual impact as a move from $100 to $200 (also a 100% increase).

Benefits of Using Logarithmic Scales

Logarithmic scales offer several advantages when analyzing long-term data or assets with significant price movements:

Identifying Long-Term Trends: Log scales help smooth out volatility and make it easier to identify long-term trends and growth patterns that might be obscured on a linear scale.

Comparing Assets with Different Price Ranges: Log scales provide a clear view of relative performance when comparing assets with 

different price ranges or units of measurement.

Improving the Accuracy of Technical Patterns: Trend lines, channels, and other technical patterns are often more accurate and meaningful when based on percentage changes rather than absolute price differences.

Projecting Future Price Movements: Log scales can provide a more realistic basis for projecting future price movements, especially for assets with significant growth potential.

Using Logarithmic Scales in TradingView

Switching between linear and logarithmic scales in TradingView is a straightforward process:

Open the chart settings by clicking on the gear icon in the top right corner of the chart window or by right-clicking on the chart and selecting "Settings."

Navigate to the "Scale" tab in the settings menu.

Under the "Scale" option, select "Logarithmic" to switch to a log scale or "Linear" to revert to a linear scale.

Alternatively, you can use the keyboard shortcut "Alt + L" to toggle between linear and logarithmic scales.

When to Use Logarithmic Scales

Logarithmic scales are particularly useful when analyzing assets with significant price movements or long-term data. Some scenarios where log scales can be beneficial include:

Tracking the growth of high-flying stocks or cryptocurrencies over extended periods

Analyzing the performance of assets with wide price ranges, such as precious metals or commodities

Identifying long-term trends and support/resistance levels in markets with high volatility

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Conclusion

Incorporating logarithmic scales into your TradingView charting toolkit can provide valuable insights and enhance your trading analysis. By understanding the differences between linear and log scales, and when to use each, you can make more informed decisions and identify potential opportunities in the market. Remember to experiment with both scales and find the one that best suits your trading style and the assets you're analyzing.