log scale vs linear scale on a stock chart

On a linear or arithmetic axis, equal vertical distance means an equal rupee change; on a logarithmic axis, equal vertical distance means an equal percentage change. Below roughly a doubling across the window on screen the two look almost identical. Above it, the linear axis exaggerates recent moves and flattens early ones, because ₹50 occupies the same space whether the stock was at ₹100 or ₹1,000.

a chart axis on which equal vertical distances represent equal percentage changes is called

A logarithmic axis, usually shortened to log — as against a linear or arithmetic axis, where equal distances represent equal rupee changes. Steady compounding plots as a straight line on a log axis, which is what compounding actually is; on a linear axis the same series curves upward and looks parabolic at the right edge.

when should i switch a chart to log scale

Once the price has more than roughly doubled across the window you are looking at — which in practice covers almost any chart spanning several years and any index over a decade. Log is also the right axis for comparing two instruments at very different price levels, since a ₹3,900 stock and a ₹95 stock cannot share a linear axis meaningfully. Stops, targets and option strikes are absolute prices, so read those on linear.

why do ₹100 to ₹200 and ₹200 to ₹400 look different on a chart

Because the axis is linear and measures rupees, so the second move is twice the size of the first and occupies twice the vertical space. On a logarithmic axis both are a 100% gain and occupy exactly the same distance, which is the honest comparison for a holder — both doubled the money put in.

does a trendline break at the same place on log and linear charts

No — the same anchor points produce different lines on the two axes, so a long-term trendline can break on one chart and hold on the other. A straight line in rupees on a linear chart is an accelerating line in percentage terms, so an ordinary move tends to cut through it. Neither version is wrong; they answer different questions, and you have to know which you asked.

Log or linear: the axis that changes what you see

Almost every charting platform opens on a linear price axis, where every rupee occupies the same vertical space. That is the correct choice for a short window and quietly misleading over a long one — because what matters to a holder is not that a stock rose ₹50, but that it rose 20%.

Think of it like this

A promotion, measured two ways

A ₹10,000 raise on a ₹30,000 salary changes someone's life. The same ₹10,000 on ₹3 lakh is barely noticed. Measured in rupees the two are identical; measured in what they mean, they are not remotely the same.

In the market

A linear chart measures in rupees. A log chart measures in percentages — so equal vertical distances represent equal proportional moves, which is how returns actually work.

What each axis does

The same data, two questions

Linear (arithmetic)

Equal vertical distance = equal rupee change
Correct for short windows and intraday
Correct when you care about absolute levels — a stop, a target, a strike
Makes long uptrends look explosively parabolic at the right edge

Logarithmic

Equal vertical distance = equal percentage change
Correct for anything spanning years or a large multiple
Correct when comparing two instruments at different price levels
Turns steady compounding into a straight line, which is what it is

Where it actually changes a decision

Worked example

The same stock, two conclusions

A compounder that went from ₹40 to ₹1,600 over fifteen years

Linear chart, first ten years₹40 to ₹300 occupies a sliver of the axisLooks almost flat

Linear chart, last three years₹900 to ₹1,600 dominates the pictureLooks vertical

Linear conclusionA common reason people sell compounders"It has gone parabolic"

Log chart, whole periodRoughly 28% a year throughoutA steady rising line

Log conclusionThe recent move is the same rate as the early one"Nothing has changed"

Which is rightThe rate of compounding never acceleratedLog, for this question

On a linear axis, consistent compounding always looks like a bubble forming at the right edge. That single distortion has talked more people out of good long-term holdings than any piece of analysis.

Practical guidance

Intraday and swing charts: linear. Nothing doubles in a week, so the distinction is academic and levels are what you care about.
Anything over two years, or any index over a decade: log. The NIFTY since 1995 on a linear axis is unreadable for the first fifteen years.
Comparing two stocks: always log, or rebase both to 100. A ₹3,900 stock and a ₹95 stock cannot share a linear axis meaningfully.
Drawing long-term trendlines and channels: log. Otherwise you are drawing a line of constant rupee growth, which no business produces.
Setting stops, targets and option strikes: linear. These are absolute prices, and the axis should be too.

Check yourself

A stock rose from ₹100 to ₹200, then from ₹200 to ₹400. How do the two moves appear on each axis?

◆ Checkpoint

Module checkpoint: sizing, stops and volatility

5 questions. Answers are revealed once you submit all of them.

1.India VIX doubles. What has it told you?

2.Why is a high win rate dangerous in a mean-reversion system?

3.What does a chandelier exit do as volatility rises?

4.You have a genuine edge and bet three times the Kelly fraction. What follows?

5.When should a chart use a logarithmic price axis?

0 of 5 answered

Simple bhasha mein

Dus hazaar ka increment

Tees hazaar ki tankhwah pe dus hazaar ka increment zindagi badal deta hai. Teen lakh pe wahi dus hazaar pata bhi nahi chalta. Rupaye mein barabar, matlab mein bilkul nahi. Linear chart rupaye ginta hai, log chart percentage — isiliye achha compounder linear pe hamesha "bubble" jaisa dikhta hai.

What to remember

Linear measures rupees; logarithmic measures percentages.
Use log once the price has more than doubled across the window.
A linear axis makes steady compounding look parabolic at the right edge.
Long-term trendlines break at different points on the two axes.
Stops, targets and strikes are absolute prices — read those on a linear axis.

You reached the endMark it done and keep your streak going.

Up nextFactors: what actually explains a return Previous: How much to bet: Kelly, half-Kelly, and why full Kelly ruins people

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Mark it done to track your progress through the curriculum.

Common questions

Short, direct answers to what people ask about this topic.

log scale vs linear scale on a stock chart: On a linear or arithmetic axis, equal vertical distance means an equal rupee change; on a logarithmic axis, equal vertical distance means an equal percentage change. Below roughly a doubling across the window on screen the two look almost identical. Above it, the linear axis exaggerates recent moves and flattens early ones, because ₹50 occupies the same space whether the stock was at ₹100 or ₹1,000.
a chart axis on which equal vertical distances represent equal percentage changes is called: A logarithmic axis, usually shortened to log — as against a linear or arithmetic axis, where equal distances represent equal rupee changes. Steady compounding plots as a straight line on a log axis, which is what compounding actually is; on a linear axis the same series curves upward and looks parabolic at the right edge.
when should i switch a chart to log scale: Once the price has more than roughly doubled across the window you are looking at — which in practice covers almost any chart spanning several years and any index over a decade. Log is also the right axis for comparing two instruments at very different price levels, since a ₹3,900 stock and a ₹95 stock cannot share a linear axis meaningfully. Stops, targets and option strikes are absolute prices, so read those on linear.
why do ₹100 to ₹200 and ₹200 to ₹400 look different on a chart: Because the axis is linear and measures rupees, so the second move is twice the size of the first and occupies twice the vertical space. On a logarithmic axis both are a 100% gain and occupy exactly the same distance, which is the honest comparison for a holder — both doubled the money put in.
does a trendline break at the same place on log and linear charts: No — the same anchor points produce different lines on the two axes, so a long-term trendline can break on one chart and hold on the other. A straight line in rupees on a linear chart is an accelerating line in percentage terms, so an ordinary move tends to cut through it. Neither version is wrong; they answer different questions, and you have to know which you asked.