OMG I can't believe this fallacy still exists in trading!

vanzandt said:
Example?
Real stocks don't get cut in half unless there's a problem.
And when it happens to an index, all bets off.
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You are getting fixated on the factors that would bring a stock down 50%...ignore that as these numbers were used as just an example....this is a logic question not a stock question so much...kind of like the plane on the conveyor belt sort of thing
 
taowave said:
Are you saying that price stops are an ineffective method of managing risk as it comes at too high a price???

Are you suggesting a trader should average down??

Do you differentiate between day trading and investing??

"ONLY" a 50% drawdown??? Do you not make a distinction between a 10 stock portfolio vs a single asset??

Do you trade?
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Don't confuse OP with details.
 
wxytrader said:
https://www.investopedia.com/investing/selling-a-losing-stock/

"A stock that declines 50% must increase 100% to return to its original amount. Think about it in dollar terms: a stock that drops 50% from $10 to $5 ($5 / $10 = 50%) must rise by $5, or 100% ($5 ÷ $5 = 100%), just to return to the original $10 purchase price. Many investors forget about simple mathematics and take in losses that are greater than they realize due to emotional distress. They falsely believe that if a stock drops 20%, it will simply have to rise by that same percentage to break even."​

This is complete nonsense. A stock that drops from $10 to $5 can just as easily increase back to $10. It happens all the time. The percent increase is completely irrelevant. If this was the case stocks would never channel.
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The fallacy here is your opinion. I presume you use this as a reason to average down on poorly performing positions. Otherwise, what is the point of holding such an opinion.
 
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