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. Rally

    A period of sustained increases in the prices of stocks, bonds ...
  2. Chartist

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

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

    1. A condition in which the price of an underlying asset has ...
  5. Technical Analysis

    A method of evaluating securities by analyzing statistics generated ...
  6. Linear Price Scale

    A type of scale used on a chart that is plotted in such a way ...
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 >>
  2. How do I Implement a Forex Strategy when spotting a Sanku (Three Gaps) Pattern?

    A forex trading strategy can easily be implemented to profit from a market reversal signal that comes from the sanku, or ... Read Full Answer >>
  3. How can I profit from monitoring open interest?

    Since markets experience asymmetric information between parties, monitor whether there is an imbalance between the open interest ... Read Full Answer >>
  4. How is liquidity risk captured by the cash conversion cycle (CCC)?

    Liquidity risk is captured by the cash conversion cycle (CCC) through the use of days inventory outstanding, days sales outstanding ... Read Full Answer >>
  5. What's a good forex strategy to use when spotting a Wedge-shaped Pattern?

    Use wedge-shaped patterns to identify bullish or bearish price action when trading currencies in the foreign exchange (forex) ... Read Full Answer >>
  6. How do I perform a financial analysis using Excel?

    Investors can use Excel to run technical calculations or produce fundamental accounting ratios. Corporations use Excel to ... 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

    Pros & Cons Of Day Trading Vs Swing Trading

    Day trading involves making dozens of trades in a single day, based on technical analysis and sophisticated charting systems. Swing trading is based on identifying swings in stocks, commodities, ...
  4. Charts & Patterns

    The 6 Most Profitable Grocery Stores

    These are the six largest grocery store chains operating in the United States.
  5. Chart Advisor

    Trade These Stocks on a Re-test of Breakout Level

    You can't always catch the breakout. If you miss it, you can still get in. Here are 4 stocks to watch for your "second chance" entry.
  6. Chart Advisor

    Cup and Handle Chart Patterns Forming Right Now

    A cup and handle is a relatively common chart pattern which can be used in various ways. Here it highlights stocks poised to make new highs.
  7. Technical Indicators

    6 Stocks for Millennials (or Anyone)

    Savvy Millennial investors looking for long-term winners should take a look at these stocks.
  8. Chart Advisor

    Long-Term Charts Suggest The Next Move Is Downward

    It is often a strategic move to remove oneself from the daily fluctuations and to broaden the time horizon to get a better idea of the long-term trend.
  9. Chart Advisor

    Silver Stocks Facing Major Resistance

    Active traders in the commodity markets are taking note of silver.
  10. Technical Indicators

    Will These High-Flying Stocks Stay Hot in 2015?

    These 10 stocks were on fire in 2014. Will they stay hot?

You May Also Like

Hot Definitions
  1. Mixed Economic System

    An economic system that features characteristics of both capitalism and socialism.
  2. Net Worth

    The amount by which assets exceed liabilities. Net worth is a concept applicable to individuals and businesses as a key measure ...
  3. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  4. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  5. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  6. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
Trading Center