If the Y-axis ticks step up evenly — 0, 10, 20, 30 — that's linear. If they jump like 0, 10, 100, 1,000, with equal spacing per order of magnitude, that's logarithmic.
A log scale draws equal percentage changes at equal on-screen distances, which is exactly why log beats linear on charts spanning 10+ years. On a linear long-term chart, the early doubling (say $1 to $2) is nearly invisible while the later doubling ($100 to $200) towers like a giant cliff — handing you the illusion that the asset "only recently exploded." Switch to log and both +100% moves show up as the same slope. The same thing happened, so the same slope is correct.
Flip it around: using log on a short-term chart of days to weeks is usually meant to look dramatic. When percentage moves are small, log and linear barely differ — so if someone reaches for log anyway, the intent is worth a second look.
Adjusted vs Nominal Price: The Same "Close," Different Numbers
This is the single most confused point in stock charts. The adjusted close reflects dividends and stock splits, so you can compare a long-term holder's actual return. The nominal close is just the price traded that day.
Say a stock does a 2-for-1 split. A nominal-price chart makes it look like the price halved overnight. But the share count doubled, so the holding's value is unchanged. On an adjusted chart, that "fake crash" simply vanishes. For comparing long-term returns, adjusted price is almost always the right basis.
| Factor | What it changes | Common misreading |
|---|
| Y-axis baseline | Not starting at 0 turns small moves into cliffs | Steep slope mistaken for a big change |
| Log vs linear | Log shows percent change at equal distance | Linear long-term chart implies "recent explosion" |
| Adjusted vs nominal | Adjusted reflects dividends and splits | Post-split nominal drop misread as a crash |
| Time axis (trading/calendar days) | Including weekends/holidays changes the shape | Assuming both charts share the same horizontal spacing |
Subtle Distortions in the Time Axis
The horizontal axis has its own traps. A trading-day chart drops weekends and holidays, packing the candles tightly so they look continuous. A calendar-day chart leaves gaps or flat stretches where weekends fall. The same stock, two different shapes. An unlabeled currency is another one: a USD chart and a KRW chart differ by however much the exchange rate moved.
How to Read Candles
There are three main chart types. A line chart connects closing prices to show the overall flow; a candlestick chart packs the day's open, close, high, and low; and a bar chart shows the same info as bars (more common in the US).
Read a single candle like this:
- Body — between open and close. On an up day, the open is at the bottom and the close at the top; on a down day, reversed.
- Upper shadow — the line up to the intraday high. A long one means "rose, then got pushed back" — a trace of selling pressure.
- Lower shadow — the line down to the intraday low. A long one means "dropped, then recovered" — a trace of buying coming in.
Longer shadows mean higher volatility that day. But don't forget that color conventions differ by market. In Korea, up is red and down is blue; in the US, up is green and down is red. Exact opposites. So don't infer direction from color alone — check where the body's open and close sit.
✍️ Operator's note — Honestly, when a "is this moonshot for real?" chart hits my timeline, I look at the Y-axis ticks before the ticker name. If it's squeezed into 99–104, even a 3% move looks like Everest. Without touching the data, one axis choice flips the whole narrative — so before getting hyped by a slope, just asking "where does the axis start?" cuts down how often you get baited.
Cautions and Limits
Even after checking the axes and scale, a chart is no crystal ball. The same pattern gets read differently by different experts, and prices often move opposite to expectations. During the 2020 COVID crash, many chart analysts expected "further declines," yet the market is recorded as staging a V-shaped rebound. A chart is only the shape of past data; it can't pre-load future events like pandemics or policy shifts.
Be wary of phrasing like "-30% from the prior high," too. If that prior high was itself a bubble, the reference point is inflated, which weakens what "-30%" even means. The same goes for signals like the golden cross and death cross — they're past observational patterns, separate from realized returns, not guaranteed trade signals.
Test Your Eye With the Quiz
The PriceGuess chart quiz hides the ticker, the absolute dates, and the absolute prices, leaving only the relative shape. So it isn't a game of memorizing tickers — it trains you to classify chart types. A steadily compounding climber, a bubble that spikes then corrects hard, a breakout after long consolidation, a V-shaped crash-and-recovery — keep just these four buckets in mind and your accuracy rises. Reading charts is about classification more than memory. To apply the same logic to coin prices, continue with crypto price guessing and test your eye there.
