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

[wxytrader]

Geez a strong uptrend doesn't have large retracements to overcome. 50 friggen percent drops do. Haha

Someone got a 7 yr old to explain this to wxy. Ask the 7 yr old to use crayons even if they think that is silly to do.

Have you even read the original post? They are not only talking about a 50% drop...they also mention a 20% drop and apply the same theory about having to overcome a 20% drop will require a greater than 20% increase to return to break even, and therefore traders need to be aware of this. No they don't lol. The stock price is not burdened by math...it is completely irrelevant.

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.

 

[SunTrader]

Have you even read the original post? They are not only talking about a 50% drop...they also mention a 20% drop and apply the same theory about having to overcome a 20% drop will require a greater than 20% increase to return to break even, and therefore traders need to be aware of this. No they don't lol. The stock price is not burdened by math...it is completely irrelevant.

Yes I have read it, and have also been well aware of it and have seen it at work with my own two eyes for well over 20 years now. Math and markets, which are based on math after all, work that way.

Which you clearly just don't get - for whatever reason. Seems because you think you are smarter. Though not sure why you are that way.

But you should take that as a hint to look for other endeavors to waste ... I mean apply your ample skills on.

Might check back again after close tomorrow for more chit and giggles.

 

[ph1l]

BUT I thought your math said price would have a difficult time doing this since whatever percent it pulled back, it would need a greater percent to recover?

No, my test showed average downswings were faster than upswings, and average downswings dropped more in points (dollars) per day than in upswings.

I found 6440 upswings with
mean time 13.3113354037267 trading days
median time 10 trading days
mean dollar change per share per trading day change 0.481707399701033
median dollar change per share per trading day change 0.238060333333333

And 6430 downswings with
mean time 9.53965785381027 trading days
median time 7 trading days
mean dollar change per share per trading day change 0.561237425952638
median dollar change per share per trading day change 0.27939325

Those measures don't say anything about percent changes or long-term price changes. But they do say, on average during a downswing, prices drop faster and more in absolute dollars per trading day than on average during an upswing. To me, this means the market moves prices down more easily than up.

 

[wxytrader]

No, my test showed average downswings were faster than upswings, and average downswings dropped more in points (dollars) per day than in upswings.

Those measures don't say anything about percent changes or long-term price changes. But they do say, on average during a downswing, prices drop faster and more in absolute dollars per trading day than on average during an upswing. To me, this means the market moves prices down more easily than up.

You are confusing data points.

 

[tsfx]

This thread leads nowhere because there are ofc examples where price retraces back up as fast as it dropped. The bigger the drop the less likely it is and yes, for volatility pricing reasons.

Thing is, you'll never really know when a retracement will be fast and when it will be slow so technically you can (and most do) disregard the concept of volatility altogether.

I, for one, have volatility concept baked into my strategies so i can't imagine diregarding them but, as the saying goes, to each their own. Cheers.

 

[wxytrader]

Yes I have read it, and have also been well aware of it and have seen it at work with my own two eyes for well over 20 years now. Math and markets, which are based on math after all, work that way.

Which you clearly just don't get - for whatever reason. Seems because you think you are smarter. Though not sure why you are that way.

But you should take that as a hint to look for other endeavors to waste ... I mean apply your ample skills on.

Might check back again after close tomorrow for more chit and giggles.

The math is right, it's just irrelevant.

 

[murray t turtle]

No, my test showed average downswings were faster than upswings, and average downswings dropped more in points (dollars) per day than in upswings.

Those measures don't say anything about percent changes or long-term price changes. But they do say, on average during a downswing, prices drop faster and more in absolute dollars per trading day than on average during an upswing. To me, this means the market moves prices down more easily than up.

%%
Sounds right, especially on a large sample, with the math .
I sure you also noticed a good downtrend or good or very good uptrend, prices tend will persist??
Up to date , so to speak example follows.
Real Money older book \Jim Cramer was explaining why Rite Aid was not really better buy about $5 then to some one, than WBA, priced much more$ then. Bankrupt now.
So good subject start by WXY trader;
but much more to it than simple math.
Its like Larry mint Hite warned , would you want to buy a cheap buggy whip co?? Not me, cheap for a good reason.

 

[wxytrader]

Case in point. I had 200 BITO call options at 1.43....on Oct.16 my position value was down to about 5k. I closed it yesterday morning at break even. Had I listened to the status quo, or believed in the bogus math I would have closed the position at a loss. I had no doubt that price would recover and I was right. I closed it because of time decay and not wanting to roll out and increase my cost. I let my spot Bitcoin ETF position (BTCC) run which is now at about 20k profit and looking for about an 80k return by Jan expiry.

Anyway both of these positions were down well over 50%...like 80% and both recovered np.

 

[wxytrader]

Yes I have read it, and have also been well aware of it and have seen it at work with my own two eyes for well over 20 years now. Math and markets, which are based on math after all, work that way.

Which you clearly just don't get - for whatever reason. Seems because you think you are smarter. Though not sure why you are that way.

But you should take that as a hint to look for other endeavors to waste ... I mean apply your ample skills on.

Might check back again after close tomorrow for more chit and giggles.

Case in point. I had 200 BITO call options....on Oct.16 my position value was down (80%!) 2 weeks ago to about 5k. I closed it yesterday morning at break even. Had I listened to the status quo, or believed in the bogus math I would have closed the position at a huge loss.

Anyway that was a 600% recovery. So either I am a genius or your math is irrelevant and you have all become victims of the traders fallacy.

 

[Nine_Ender]

Case in point. I had 200 BITO call options....on Oct.16 my position value was down (80%!) 2 weeks ago to about 5k. I closed it yesterday morning at break even. Had I listened to the status quo, or believed in the bogus math I would have closed the position at a huge loss.

Anyway that was a 600% recovery. So either I am a genius or your math is irrelevant and you have all become victims of the traders fallacy.

You have to be one of the most illogical people on here. Your premise of a "traders fallacy" is complete crap. However, not surprising since your economic theories are wacky too ( no, Bitcoin will not become a global currency; it will more likely drop to near zero if you wait long enough ). There is no point to your thread other then exposing your inability to process the world rationally.