Excatly,when in doubt,he makes stuff up...Traders fallacy,Pikers fallacy..Cmon OP!!!
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OMG I can't believe this fallacy still exists in trading!
- Thread starter wxytrader
- Start date
You keep using that expression incorrectly. It is Gamblers or Monte Carlo Fallacy.
Which has nothing to do with reversing an established trend.
No wonder you are doing binaries. You only need to get the direction right. Math, simple math, is obviously not your strength.
Done with this rinse repeat trying to get thru a thick skull, and I don't mean for the night.
it's not the same as Monte Carlo or gamblers fallacy because they have to do with the odds of the same result happening again diminishes every time it repeats.
I will try again. The traders fallacy is the belief that once a stock drops 50% it will be harder to recover your losses to break even because to get to break even it now has to increase by 100%
This is a fallacy. It will be no less probable that the stock will return to break even...the probability is completely equal with the same sentiment. Now regarding the article ..your portfolio will also recover relative to the stock. The actual percentage drop in the stock and in your portfolio are completely irrelevant to the probability of a total recovery.
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I am certainly not missing the point....
Your point is well taken,its also wrong,not too mention taken out of context....
The proof is in the pudding..You couldnt answer one question I asked..
Again,whats more likely,a stock declining 50% from its high and then going up 100%.or a stock declining 50%,only to head south for another 50 percent??
Other than never really traded, why is it so hard for you to wrap your noggin around the simple fact that taking a 50% drawdown is a massive hit and very difficult to recover from???
Your point is well taken,its also wrong,not too mention taken out of context....
The proof is in the pudding..You couldnt answer one question I asked..
Again,whats more likely,a stock declining 50% from its high and then going up 100%.or a stock declining 50%,only to head south for another 50 percent??
Other than never really traded, why is it so hard for you to wrap your noggin around the simple fact that taking a 50% drawdown is a massive hit and very difficult to recover from???
You are completely missing the point of what a traders fallacy is referring to.
I am certainly not missing the point....
Your point is well taken,its also wrong,not too mention taken out of context....
The proof is in the pudding..You couldnt answer one question I asked..
Again,whats more likely,a stock declining 50% from its high and then going up 100%.or a stock declining 50%,only to head south for another 50 percent??
Other than never really traded, why is it so hard for you to wrap your noggin around the simple fact that taking a 50% drawdown is a massive hit and very difficult to recover from???
The article used 50% as an arbitrary number to use as an example. Obviously if a stock drops 50% it's a capitulation and you will have to wait for a recovery. The part about the article that makes no sense is showing that after only a 50% drop, the stock/portfolio now has to recover 100% just to reach break even...implying that it will be harder for a stock or portfolio to recover, and that traders need to mitigate losses because of this. This is a fallacy
Just started trading? lol who has a Lambo?
We aren't talking about a portfolio being down 50% and how much percent is needed to recover...we are talking about the price of a stock being down 50% and the probabilities of it returning a previous level.
Again. If a stock drops from $10 to $5 there is no mathematical burden preventing the stock from rising to $10 again.
I thought it was a Lotus?
That would be an external factor. There are a lot of things that can affect price action as mentioned. We are just talking about the claim that if a stock drops from $10 to $5 then it has only dropped 50%, therefore it will be harder to recover your losses because the stock needs to increase by 100% just to break even. This is a fallacy.
Would you rather recover from a 50% drawdown or 100% drawdown?
Sort of correct..as far as not relying on erroneous math to justify your opinion.
Math-Still being erroneous after 40 billion years.
Would you rather recover from a 50% drawdown or 100% drawdown?
If a $10 stock has dropped by 50% to $5 it will have to recover by 100% to return to $10. Do you think this makes your chances of recovering your losses less likely?
If a $10 stock has dropped by 50% to $5 it will have to recover by 100% to return to $10. Do you think this makes your chances of recovering your losses less likely?
I acknowledged earlier that I see the point you are trying to make.
But arguing against the math is going to make you look silly.
I defended someone a while back who made the same sort of statement you are making,I first had to acknowledge the math,then I was able to say that they were talking in laymans terms i.e lost $5 bucks,need $5 bucks back.