How to use log charts and why they're important

The two charts in this idea show Tesla's stock price since its IPO. The only difference is one chart is a log chart and the other is a normal linear price chart. That's why they look different. Understanding log charts and normal linear charts is an important skill for all traders and investors. Especially when looking at price changes over long periods of time.

The chart on the left is a log chart of Tesla and the chart on the right is a linear price chart of Tesla. Log charts show the percentage change difference between prices while a normal linear chart shows a fixed distance between prices. Take one more look at both charts above. If you still don't fully understand what they show, don't worry, keep reading. 😁

Let's say Tesla, back in its early days as a publicly traded company, spiked from $5 per share to $10 per share. That is a 100% move. You would have doubled your money. A few years later, Tesla reached $100 per share and then spiked to $105 per share. That is only a 5% move. Both price moves in this example represent an increase of $5 per share, but one is a much larger percentage change. That's where log charts come in handy - they show this percentage change! On a normal chart, however, each price level is shown at a fixed distance. So a move from $5 to $10 is shown in the same way as a move from $100 to $105.

Getting started with log charts is fast and easy:

1. If you're on a PC, press Alt + L on your keyboard. This keyboard combination will quickly adjust your chart to log. You can press that combination again to return to a normal linear price chart.
2. If you're on a Mac, press Option + L. You can quickly switch between log charts with this combination on your Mac.
3. You can also click the log button located near the bottom right of the chart to toggle it on or off.

One more tip: hover your mouse over the price scale, then click, hold, and drag it up or down to compress or decompress the price scale. This simple tip gives you more control over the price scale for both log and normal linear charts.

So how should you use log charts going forward?

The most important thing to know you have the tools to analyze price action in multiple ways. Always compare and contrast by viewing both charts when necessary. New traders and investors are always surprised by how much more information a log chart shows over long periods of time. Additionally, comparing log charts to normal linear price charts can unlock new insights. The two Tesla charts in this example demonstrate that perfectly. One chart looks parabolic, noisy, and slightly messy. The other is spaced out, shows defined trends, and makes trading ranges impossible to miss.

Thanks for reading! As always, please leave questions or comments below. If you have a product request or feature need, please also write that in the comments. Our team will help.