StockCharts Insider: Your Chart Might Be Lying to You — Here’s How to Fix It

September 27, 2025 at 07:46 PM

Before We Dive In…

If you’ve never checked whether your chart is set to log scale or arithmetic scale, you might be looking at a distorted picture without even knowing it. Not a great way to start your analysis. One small setting, one HUGE impact. Let’s make sure your chart isn’t bending reality by examining how and when to use log vs. arithmetic scale.

Log vs. Arithmetic Scale in 10 Seconds

The plain explanation goes like this:

A chart set to a logarithmic scale shows equal percentage spacing.
A chart set to an arithmetic scale shows equal dollar spacing.

Simple, right? But depending on the stock and the timeframe, the difference between the two can be so huge that the charts may be telling completely different stories.

How Different Can They Be? Check Out This Example

Here’s a monthly log scale chart of Tesla (TSLA) going back 15 years.

FIGURE 1. MONTHLY LOG SCALE CHART OF TSLA. Pay close attention to the enumerated areas.

Pay attention to what’s going on in each numbered segment. Here’s what I see:

1 - Liftoff: This marks Tesla’s IPO and first major run, from about $1 to $17.67. That’s a gain of over 1,000%.

2 - The Big Stall: TSLA moved mostly sideways from 2014 to 2020 between $9.40 and $25.80; still a wide range (about 175%), but no major breakout.

3 - Rocket Ride: From 2020 to early 2022, TSLA skyrocketed from $26 to $371. That’s an eye-popping 1,300%+ move in just two years.

4 - The Correction Years: Late 2021 into 2025 saw two major drops: First -76%, then -55%. Yet, despite the drops, the swing lows kept rising (check the blue trendline).

Got the Picture? Good. Now Look Again

Now take everything you just saw… and try lining it up with this chart:

FIGURE 2. MONTHLY ARITHMETIC SCALE CHART OF TSLA. Same stock. Same timeline. Different scale.

And suddenly, the story changed.

Section 1? That massive 1,000% surge just disappeared.
Section 2? That 175% trading range looks as flat as a pancake.
Section 3? Still there, but now way bigger than section 1, even though the moves are similar.
Section 4? Those two pullbacks look a bit too visually overblown.

If you did your analysis with the arithmetic scale and stuck to it, look at everything you would’ve missed.

In short, log scale charts show a more realistic and accurate representation of asset growth. Long-term trends are easier to spot, and recent price action won’t get blown out of proportion.

Insider Tip 1: It’s okay to use arithmetic scale charts when analyzing short-term price action

Use an arithmetic scale when analyzing short-term price action, especially during intraday periods such as 5-minute to 1-hour charts. Why? Because on an intraday level, percentage moves are so small they’re almost irrelevant.

That said, you’ll want to toggle back and forth to see what works best for your analytical strategy. While log scale is often much more accurate, it still has certain limitations, which we’ll cover in Tip #3.

Insider Tip 2: Long-term trendlines are best drawn on the log scale

On a log scale, trendlines show consistent percentage growth. For example, take a look at this chart of the S&P 500 ($SPX) over 15 years.

FIGURE 3. 15-YEAR MONTHLY CHART OF THE S&P 500 ON A LOG CHART. Notice how smooth the primary trend appears.

That’s pretty clear, don’t you think? As an investor, you want to see the growth of value in terms of percentage.

Now, when you shift over to an arithmetic scale, things get a bit weird.

FIGURE 4. SAME CHART BUT USING ARITHMETIC SCALE. It’s still an uptrend, but it tells a completely different story—perhaps even a misleading one—when measuring moves in dollar amounts and not percentages.

Compared to the log scale chart, these are not the same trendlines. The log chart shows a smooth ascending trend, while this shows two broken trendlines with the price action after 2020 moving almost parabolically, which can be misleading.

Insider Tip 3: Know the history – traditional chart patterns and other indicators like the Fibonacci retracement tool were developed on arithmetic scale charts

In the early to mid-20th century, before computers were common tools, analysts had to chart things out by hand. Imagine trying to draw logarithmic charts using paper, pencil, and a ruler. For most analysts, it just wasn’t happening.

That’s why most traditional chart patterns and even indicators like the various Fibonacci indicators were designed for arithmetic scale charts, which measure dollar moves and not percentage moves. Switch to log scale, and those patterns can look compressed, squished, or just plain odd.

A BIG CAVEAT: Measuring chart patterns on a log scale can give you a different price target than on an arithmetic scale.

So, what should you do when setting price targets? If you want to use the traditional method, this is where you switch back to an arithmetic scale. But if you’re measuring a longer-term pattern, then you should toggle back and forth to decide which target is more feasible for your strategy.

When it comes to longer-term trend analysis, though, most pro analysts use logarithmic scale charts, as they more accurately represent trending activity based on percentage movements.

And That’s a Wrap

Here’s what you got from this article: Insider charting tips to prevent you from misreading the markets. Now that you know when and how to use both log and arithmetic scale charts, you’ve officially upgraded your market analysis game.

Tips & Tricks How To Market Analysis Indicators

About The Author:

Karl specializes in finance and crypto. He works with several organizations in the equities, futures, physical metals, and blockchain industries. He holds FINRA Series 3, Series 34, and a dual MFA. Learn More

Previous Article Next Article