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I am familiar with the conditional formatting in excel where you can fill the background of a range of cells with gradient colors according to their value. You can either choose a 2-color scale or a 3-color scale. However, this only seems possible for background colors of the cells but not the text/foreground color. Is this something I can do at all in excel?

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You can manually format individual letters in cells, however there is no automatic (macro, conditional formatting...) way in Excel for managing parts of the same cell differently.

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If you have a constant number of entries, you could use top 10, 5 , 1 function and define font colours by category

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