❄️ The importance of preparing the scale in market analysis: Focus on the digital currency market 🌉 In this post
Did you know that the scale setting in the TradingView platform directly affects the accuracy of your technical analysis? 99% of traders overlook this, which can lead to inaccurate trading decisions. Here are the basic types of scales and how they can impact your analysis, focusing on Bitcoin as an example. 📈💡
🏴☠️ Basic types of scales
1. Arithmetic scale (Normal):
Strength: Displays price action evenly based on numbers. Suitable for small movements, such as Bitcoin's daily volatility when markets are quiet.
Weakness: It can be misleading in the case of large price movements over a long period. If the price of Bitcoin rises from $50,000 to $70,000, the arithmetic scale may not accurately reflect the magnitude of this change.
When to use it: If you are day trading and need a clear view of small changes.
Strength: Weak to moderate, especially in volatile markets.
2. Percentage scale:
Strength: Measures changes as a percentage, allowing you to see relative performance. Helps compare Bitcoin's performance to other assets.
Weakness: Not ideal for analyzing large or long-term trends. If Bitcoin makes a 30% jump in a single day, this metric may not fully reflect future developments.
When to use it: When you want to compare the performance of different assets in a relative manner or when dealing with ratio-sensitive financial data.
Strength: Medium, depends on the situation but not for assets with large movements.
3. Reference index 100 (Indexed on 100):
Robustness: It is easy to compare the performance of multiple assets starting from the same reference point. All assets start from a reference point (100), making it easy to compare between them.
Weakness: Not suitable for analyzing trends or sharp market changes. If 💰 Bitcoin suddenly rises, the benchmark may not reflect this change well.
When to use it: When you want to track the performance of multiple assets at the same time from a single starting point.
Strength: Average, but not ideal for analyzing technical trends.
4. Logarithmic scale 💰:
Strength: It is considered the most powerful for analyzing long-term trends and large price movements. The logarithmic scale clearly shows relative changes, helping you see how prices change relative to each other evenly.
Weakness: May not be suitable for small daily moves, as some traders may need to see precise price movements.
When to use it: If you rely on long-term technical analysis, especially with analyses such as Gann time boxes or position trading. If you use Bitcoin analysis over a weekly or monthly period, the logarithmic scale will give you a clearer view of the larger trends.
Strength: The most powerful measure, ideal for analyzing long-term markets and large price movements.
👌How can this help you?
If you rely on Gann Squares analysis or position trading like me, choosing the logarithmic scale gives you a more accurate picture of the market movement, especially if you are looking for big changes that occur over a long time frame. The logarithmic scale will show you exactly how Bitcoin prices are evolving, helping you assess trends more clearly. 🚀
🗿 Without a doubt, the logarithmic scale is the most powerful if you want to analyze long-term trends or deal with assets that move quickly and at large rates, such as cryptocurrencies. If you are day trading on small movements, the arithmetic scale may be sufficient, but if you aspire to develop a strategy based on large trends, the logarithmic scale is the better choice.
👀🔎 Advice
Setting your chart settings correctly is key to a clearer view of the markets. If you want to analyze big trends and profit from big market moves, use the logarithmic scale. Make sure you use the right setting according to your strategy, as it can be the difference between a winning trade and a losing trade. 🦖
🐈 I know that many do not realize the depth of this idea, while I was changing the settings I remembered you. Your prayers for us are enough, because the information that may take years to learn will not be found even with those who consider themselves experts. Go beyond all boundaries here.
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