Log versus linear scale

If you buy a stock at ₹10 and it goes to ₹20, you have made a 100% return. You doubled your money. If you buy a stock at ₹1000 and it goes to ₹1010, you have made a 1% return. You barely beat a savings account.

Yet, on a standard (linear) chart, a ₹10 move takes up the exact same amount of vertical space, regardless of whether the stock is trading at ₹10 or ₹1000.

If you are looking at a 10-year chart of a stock that has grown from ₹10 to ₹1000, how can you possibly analyse it when the early years (where the highest percentage gains happened) are completely crushed at the bottom of the screen?

A Linear scale (the default on most charting apps) treats absolute rupees equally. The distance between ₹10 and ₹20 is the same as the distance between ₹100 and ₹110.

A Logarithmic (Log) scale treats percentages equally. The distance between ₹10 and ₹20 (a 100% move) is visually identical to the distance between ₹100 and ₹200 (also a 100% move).

If you are a day trader looking at a 5-minute chart, linear is fine because the price barely changes. But if you are an investor looking at compound growth over a decade, linear charts will actively lie to you.

Click Switch to Log Scale below to watch a multi-bagger chart transform from a misleading parabolic curve into the steady, honest truth.

Every price in this module is an illustrative example, not a real quote. [illustrative]

The rule for Log vs Linear is simple: use Log for time, use Linear for execution.

1. The 10-Year Chart (Log required): You are looking at a company that grew at 20% a year for a decade. On a linear chart, it looks like a bubble that is about to burst, going straight up at the end. On a log chart, it reveals itself as a perfectly steady, sustainable straight line.
2. The 5-Minute Chart (Linear required): You are trying to buy 1000 shares today. You just want to see the immediate spread and the intraday support levels. A linear chart is fine here, because the stock is only moving 1% or 2% anyway.

A log chart is visually forgiving. If a stock drops from ₹1000 to ₹500, that is a devastating 50% crash. But on a log chart, that 50% crash takes up the exact same amount of visual space as a drop from ₹10 to ₹5.

Because we are used to linear charts, a 50% crash on a log chart doesn't look as terrifying as it actually feels to your portfolio. It can lull you into a false sense of security during a bear market.

Trendlines drawn on a linear chart over a multi-year period are completely invalid.

If you draw a support line connecting the bottoms of a stock from 2010 to 2020 on a linear chart, and then you switch to a log chart, the line will be floating wildly in the middle of nowhere. Trendlines must be drawn on a Log scale if they span multiple years, because you are trying to measure the consistency of the percentage growth, not the absolute rupee growth.

The deeper trap is thinking one scale is "the honest one." Take the same 10-year chart where the price recently jumped from ₹800 to ₹1200 in a few months.

Before you call either view the honest one, ask: what would change your mind? If you switch to log and the recent spike still stands well above the multi-year slope, the "steady compounder" read weakens and you are looking at something faster and less proven than the smooth line suggested.

We have covered every major way to manipulate the Y-axis (price) and the X-axis (time, volume, or range) to reveal different truths about the market.

In the final module of this part, we will pull it all together by looking at the most fundamental decision you have to make before you even open a chart: what timeframe should you be looking at in the first place?