Take a look at all the stocks ... that didn't come back. Those who went to 0.00 IOW bust. Or those who sit languishing for years and years. Like GE, for instance. Made all time high in 2000. Still hasn't even made a 30% retracement back up!!!!!! Gezzus. Bet many current hodlers said to themselves. Yep it'll come back, its only down $20, what's that. Pfft. Well ok now it's only $30, $40, $50 etc. But simple math aggggggggggggain tells you a stock that drops from $2 to $1, needs a 100% move to make it back to $2. With me so far? Another stock that drops from $200 to $100 needs the same 100% move to make it back to original price $200 Which has a greater probability of happening? Especially in a timely manner - like oh within a calendar year. Repeat, greater probability. We are not struggling. Those who fail to see ...... the math of the price action of the markets are.
BTW GE currently @ $109.38 is down $255.17 from its all time high of $364.55 which works out to just about a 25% retracement. Only 75% more to go, 23 years and counting later.
Think many suffer from confirmation bias. They see it work and say, look this stock did it. What's the big deal? While forgetting, more likely never "seeing", alllll the other times it doesn't.
In any event, the mathematical observation is most compelling as it relates to your trading account. If you lose half your money, you will have to double it to break even. It's a lot easier to lose half your money than it is to double it. So how much of your account did you put into that losing trade where the stock price halved?
OMG you can't seriously not see the flaw in your logic?? You are giving a perfect example of the traders fallacy. Which has a greater probability of happening? You aren't measuring probabilities with your simple math. That is the FALLACY! Probability of a price returning to ANY previous level is determined by ATR, and other technical factors, catalysts, fundamentals etc. It is not determined by picking some arbitrary price level and figuring out what percentage gain is needed to return to that level. Maybe this will help. What if the price was at $5 already? Are you saying because mathematically it needs to go up by 100% to reach $10, and only needs to drop by 50% to reach $2.50 that there is a higher probability that it will drop to $2.50? So we should toss out all TA, and all value investing, and all fundamentals and just short the market constantly because that's what the math says? LOL!
NO IT ISN'T! This is so frustrating. Your portfolio will go up and down relative to the stock price. The stock price doesn't care about YOUR profit and losses. Price action is not determined by YOUR profit and losses. This is the FALLACY! You are measuring your portfolio P/L and wrongly applying that as probability of price action.
You're conflating concepts. The funny thing is, your argument about price behavior is completely irrelavant to the article's points.
Did you seriously bring ATR into the discussion of a stock moving up 100% after a 50% decline??? Not only do you "not know what you dont know",you dont know what you do know...
Yes if there was a catalyst such as a bad earnings report etc then the price will likely not return to the previous level...but THAT is due to the bad earnings report, not due to the false mathematical burden you are placing on it. You guys are all suffering from the traders fallacy...its hilarious...and a bit concerning.