This tutorial assumes you have log returns ready for your analysis, if not please check how to prepare them in Excel here.
¶ How to plot log returns in Excel?
Log returns are simply a change in prices expressed in percentage terms.
We can show that on a graph in several ways:
¶ As a signal amplitude
- Select both Date and Log returns column in your table
- Go to Insert tab, click to insert Recommended chart then choose All Charts and pick a Clustered Column chart
¶ What does it tell us?
- It tells us how volatile Bitcoin is, as you can see there were some significant drops in Bitcoin value in a single day, we can examine what and when that was in order to gain more insight what drives Bitcoin.
¶ As a histogram
- Select both Date and Log returns column in your table
- Go to Insert tab, click to insert Recommended chart then choose All Charts and pick a Histogram chart
¶ What does it tell us?
- It tells us how disperse Bitcoin price is and that information we can use to predict how much can a price drop in a day, a month or a year. We can set some confidence levels using history data to make an educated guess what could happen in the future, but more on that here
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