Trading on Log scale vs Linear scale: Why it makes a diference
Hi folks, what a great day for Bitcoin today. We just witnessed a massive pump with volume equivalent to the pump back in Feb from the 6k low point. Lots of people are getting very excited to put an end to this bear market. However, let’s remember we haven’t broken out of the upper resistance line formed from ATH down, which has been the last barrier to get through to truly claim we are out of the bear market.
What I have to show you guys is the important difference between using linear scale vs log scale. Many traders on here use linear scale on their charts, but I will show you why using this would have made you miss out on some things.
On the left is linear scale, on the right is log scale. After Bitcoin rallied back up towards 17.2k in January, we had our second reaction high to be able to draw out a trend line that would act as resistance.
This line is in blue on both charts. However, looking at linear scale, we notice there was a break out from the resistance line around March 1st. Anyone looking at this would have thought that we have finally rallied out of the bear market and FOMO bought in. But on the log scale, a trend line drawn on the exact same points would have showed traders the price couldn’t break through the resistance and properly reversed as expected.
So while the linear scale traders saw this as a fake breakout, the log scale traders saw the resistance line creating resistance.
Looking at the green support line, we see it was broken to the downside on both log and linear scale. The difference here is when this line turned into a resistance line, it looks like we already broke out of this point on linear scale while on the log scale, we still have a little bit to go before breaking through it.
Still this resistance isn’t as important as the blue resistance line. On the log scale, you can see we still have to break through this line to confirm we have broken out of the downtrend formed since the ATH.
I think we eventually will break through it, the volume and spike in price today just seems too strong to continue moving down. And I am only sharing this with you so we can properly assess our next points of resistance and trade accordingly. We could see another fake breakout like the one at 11.7k (on linear scale), but on log scale we should be well prepared to sell if resistance is strong at that blue trend line.
What I have to show you guys is the important difference between using linear scale vs log scale. Many traders on here use linear scale on their charts, but I will show you why using this would have made you miss out on some things.
On the left is linear scale, on the right is log scale. After Bitcoin rallied back up towards 17.2k in January, we had our second reaction high to be able to draw out a trend line that would act as resistance.
This line is in blue on both charts. However, looking at linear scale, we notice there was a break out from the resistance line around March 1st. Anyone looking at this would have thought that we have finally rallied out of the bear market and FOMO bought in. But on the log scale, a trend line drawn on the exact same points would have showed traders the price couldn’t break through the resistance and properly reversed as expected.
So while the linear scale traders saw this as a fake breakout, the log scale traders saw the resistance line creating resistance.
Looking at the green support line, we see it was broken to the downside on both log and linear scale. The difference here is when this line turned into a resistance line, it looks like we already broke out of this point on linear scale while on the log scale, we still have a little bit to go before breaking through it.
Still this resistance isn’t as important as the blue resistance line. On the log scale, you can see we still have to break through this line to confirm we have broken out of the downtrend formed since the ATH.
I think we eventually will break through it, the volume and spike in price today just seems too strong to continue moving down. And I am only sharing this with you so we can properly assess our next points of resistance and trade accordingly. We could see another fake breakout like the one at 11.7k (on linear scale), but on log scale we should be well prepared to sell if resistance is strong at that blue trend line.