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Tip: If you look at forex charts, use logarithmic scale rather than linear scale, it better represents actual gains/losses.

The logarithmic scale, for those who might now know exactly what it is, will display on the vertical axis numbers [0, 1, 10, 100, 1000, ...] at equal distance, rather than [0, 1, 2, 3, 4, ...].

Why is this better?

What matters is not the actual value of a currency in another currency, but the variation of that currency. Most people only care only about the gains or losses, not whether the actual value of a unit of currency is $1 or $1000.

Example:

Say you invest $1000 in a coin when it's worth $1 then sell when it's worth $2: you made $1000 profit. Now take the same amount but invest when it's worth $5 then sell when it's worth $10: you also made $1000 profit, right?

The value of the currency in USD never mattered, only its fluctuation did! Which is what a logarithmic scale shows: variation, rather than actual value.

On a linear scale, the jump from $5 to $10 will look like a much higher than $1 to $2 (because the difference of value is +$5 vs +$1), however when you look on a logarithmic scale, you'll see the same jump.

Here's a chart I had made a few years ago trying to illustrate this (not a cryptocurrency, just a regular equity stock, but same principle).

tldr; Don't get fooled by big or small jumps on a linear scale: use a log scale which will reflect your gains and losses accurately.

submitted by /u/namyls
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Tip: If you look at forex charts, use logarithmic scale rather than linear scale, it better represents actual gains/losses. Tip: If you look at forex charts, use logarithmic scale rather than linear scale, it better represents actual gains/losses. Reviewed by paksvideo on January 21, 2018 Rating: 5

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