3 ms·

So the logarithmic scale is just an approximation of this "price appreciation" or whatever - wouldn't a better solution be to weigh the market data by it and st

• fredophile 10y ago
  No. Imagine a stock that's at 50 dollars today (T0). Over the next month it doubles in price and goes to 100 dollars (T1). A month after that its doubled again and the price is now $200 (T2). On a linear chart the difference in price between times T0 and T1 looks much smaller than the difference between times T1 and T2. However, an investor that bought at time T0 and sold and time T1 would have made exactly the same amount as someone that bought at T1 and sold at T2. If this was two different stocks and they had both gone up 100% in the same time frame the linear scale would make the more expensive stock look like a more impressive gain. Another way to think about it is that you don't really care if a stock moves $x. You care if it moves x%. Logarithmic scales let you visualize this more accurately.