Logarithmic Price Scale

AAA

DEFINITION of 'Logarithmic Price Scale'

A type of scale used on a chart that is plotted in such a way that two equivalent percent changes are represented by the same vertical distance on the scale, regardless of what the price of the asset is when the change occurs. The distance between the numbers on the scale decreases as the price of the underlying asset increases. This is the case because a $1 increase in price becomes less influential as the price heads higher since it now corresponds to less of a percentage change than it did when the price of the asset was at a lower level. Also referred to as a "log scale".

Logarithmic Price Scale

INVESTOPEDIA EXPLAINS 'Logarithmic Price Scale'

Logarithmic price scales are generally accepted as the default setting for most charting services, and they're used by the majority of technical traders. Common percent changes are represented by an equal spacing between the numbers in the scale. For example, the distance between $10 and $20 is equal to the distance between $20 and $40 because both scenarios represent a 100% increase in price. Contrast this to "linear price scale".

RELATED TERMS
  1. Chartist

    An individual who uses charts or graphs of a security's historical ...
  2. Overbought

    1. A situation in which the demand for a certain asset unjustifiably ...
  3. Oversold

    1. A condition in which the price of an underlying asset has ...
  4. Rally

    A period of sustained increases in the prices of stocks, bonds ...
  5. Technical Analysis

    A method of evaluating securities by analyzing statistics generated ...
  6. Candlestick

    A chart that displays the high, low, opening and closing prices ...
RELATED FAQS
  1. What is the difference between a logarithmic price scale and a linear one?

    The interpretation of a stock chart can vary among different traders depending on the type of price scale used when viewing ... Read Full Answer >>
Related Articles
  1. Active Trading Fundamentals

    Charting Your Way To Better Returns

    Learn about the powerful hybrid techniques that take advantage of both technical and fundamental analysis.
  2. Forex Education

    An Introduction To J-Charting

    Learn about a technical tool that's based on the view that markets are energetic systems.
  3. Trading Strategies

    How to Do the Fundamental And Technical Combo Trade

    Fundamental and technical analyses should be viewed as complementary rather than competing practices. When combined, these two methods can greatly strengthen your game.
  4. Stock Analysis

    A Trader's Look at the S&P 500

    Moving averages are sending an important signal, and it's probably not what you think.
  5. Chart Advisor

    Is Now the Time to Invest in North America?

    Bullish chart patterns across the North American markets suggest that now might actually be a wise time to allocate closer to home.
  6. Chart Advisor

    These Oil Service Stocks Are Ready For A Move Higher

    In the oil services sector, active traders have been trying hard to establish a floor and the double bottom pattern that is appearing on the chart suggests that a short-term reversal could be ...
  7. Trading Strategies

    The Top Five Stocks For Novice Swing Traders

    New to Swing Trading? Here are the top five stocks recommended for swing trading.
  8. Chart Advisor

    These ETFs are Breaking Out of Chart Patterns Now

    Three buys and one sell; here are four ETFs breaking out of chart patterns right now.
  9. Trading Strategies

    Capitalize On Collars To Enhance Your Trades

    Trade collaring measures current technicals and makes swift adjustments to account for environmental changes.
  10. Trading Strategies

    Look At The Whole Picture To Manage Whipsaws

    Look at past action to organize a whipsaw’s volatile characteristics, identifying harmonic levels that may offer low risk entry prices.

You May Also Like

Hot Definitions
  1. Asset Class

    A group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same ...
  2. Fiat Money

    Currency that a government has declared to be legal tender, but is not backed by a physical commodity. The value of fiat ...
  3. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  4. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  5. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  6. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
Trading Center