why does price tend to fall faster than it rises?

Discussion in 'Trading' started by 1a2b3cppp, Sep 1, 2011.

  1. baro-san

    baro-san

    Has everybody noticed that rising 10% from $100 is $10, then dropping 10% from $110 is $11?
     
    #31     Sep 5, 2011
  2. SunTrader

    SunTrader

    Buying is done mostly after a number of factors are considered.

    Selling more times than not is "get me the f*&^ out NOW"!!!!

    :p

    + + +

    Step away from the keyboard if you haven't learn yet that fear is most definitely a stronger emotion than greed - unless your last name is Buffett, Slim, Gates or any member of the Saudi royal family.
     
    #32     Sep 5, 2011
  3. So you are saying that normal returns aren't larger in the downward direction? I would argue that they are.
     
    #33     Sep 5, 2011
  4. This is a good explanation on the red bar Vs. the green bar thingy...

    ES

     
    #34     Sep 5, 2011
  5. New trading strategy

    If the rate of acceleration is more than ______during a chosen period

    then statistically

    the rate of fall is larger than the rate of acceleration during the next chosen period.

    ES


     
    #35     Sep 5, 2011
  6. I have read several threads started by the OP and I know one of his consistent themes is that he cannot "predict direction."

    The subject of this thread suggests a deviation from that theme. If markets do indeed move differently when they're going down than when they're going up, then this suggests that price movement is at least somewhat predictable. That is, it's more important to get out quickly (or establish a hedge) once price starts going down, than when price is going up.
     
    #36     Sep 5, 2011
  7. Hi5!
     
    #37     Sep 5, 2011
  8. Price tends to fall faster than it rises due to price weighting which produces a negative downside bias. The time from one trough to peak might be "faster" in bars from one time to another, but the peak to trough could be even faster because of the price weighting mechanism particularly in the DOW that gives a less robust picture of its index components than you would otherwise get without the divisor or from a value weighted index.
     
    #38     Sep 5, 2011
  9. lindq

    lindq

    Because of the rotation of the earth and the magnetic field, you'll find that this is the case in the northern hemisphere.

    But you'll find that south of the equator, in Australia for example, price rises faster than it falls.
     
    #39     Sep 5, 2011
  10. so you mean the green gets spread around? :D

     
    #40     Sep 5, 2011