medium · Elliott Wave Theory ewt-core
A practitioner is reviewing a wave count for a crypto-asset. The price rose from $100 to $500 (Wave 1), retraced to $150 (Wave 2), and then rocketed to $2500 (Wave 3). If the chart is in 'Arithmetic' scale, the Wave 2 retracement looks like a total crash.
Why might switching to 'Logarithmic' scale be necessary?
- Log scale maintains the proportionality of percentage moves across extreme price ranges.
- Log scale makes Wave 3 appear proportionally shorter so it doesn't technically violate Rule $2.
- Wave 4 is legally permitted to overlap Wave 1's territory when using Log charts.
- Fibonacci ratios technically only work on Logarithmic scales for crypto-assets.
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