Arithmetic vs Geometric Differences

Understanding Market Movements in Different Ways

Arithmetic (Simple Counting)

Looks at absolute differences

Example 1: 4 - 1 = 3
Example 2: 10 - 7 = 3
Result: Both differences are seen as equal (3)

Geometric (Growth Based)

Looks at relative differences

Example 1: 4/1 = 400% (4x growth)
Example 2: 10/7 ≈ 143% (1.43x growth)
Result: Shows different magnitudes of change

Example 1

Example 2