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.
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
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.