[ 3 / biz / cgl / ck / diy / fa / ic / jp / lit / sci / vr / vt ] [ index / top / reports ] [ become a patron ] [ status ]
2023-11: Warosu is now out of extended maintenance.

/biz/ - Business & Finance

View post   
File: 303 KB, 3544x1892, gains_needed.png [View same] [iqdb] [saucenao] [google]
28004735 No.28004735 [Reply] [Original]

Hey everyone, friendly reminder to all beginners and advanced traders that holding (hodl'ing) your position is not ideal up to a certain point. The math of percentages shows that as losses get larger (compound interest), the return necessary to recover to break-even increases at a much faster rate. A loss of 10 percent necessitates an 11 percent gain to recover - and that is where it goes all downhill. Increase that loss to 20 percent and it takes a 25 percent gain to get back to break-even. A 50 percent loss requires a 100 percent gain to recover and an 80 percent loss necessitates 400 percent in gains to get back to where the investment value started.

Investors who get hit by a bear market need to be aware that it will take a while to recover, but the math of compounding returns will help the cause. Consider a bear market with a 30 percent drop in value, down to 70 percent of what the stock portfolio was worth. A 10 percent gain returns the portfolio to 77 percent. The next 10 percent recovers to 84.7 percent. Two more 10 percent gain years put the portfolio back to 102.5 percent of the value before the drop. So a 30 percent drop necessitates a 42 percent recovery, but 10 percent a year compounded for four years puts the account back into profitable territory.

What the math of stock market losses shows best is that investors need to protect themselves against big losses as shown in the diagram above. Mental or limit based stop-loss orders to sell stocks or cryptocurrencies are there for a reason. When a certain loss level is reached, it will pay off big if the market is moving into bear market territory. Investors sometimes have trouble selling stock they like at a loss, but they will like the stock or cryptocurrency if it can be bought back at a lower price.

>> No.28004994

Nice FUD

>> No.28005004

>>28004735
Interdasting, you’re talking to an empty room though, all these people care about is shitcoins.

>> No.28005117

>>28004735
>set a stop loss for -5%
lmfao

>> No.28005123
File: 99 KB, 633x724, 1610435372464.jpg [View same] [iqdb] [saucenao] [google]
28005123

Dr;ns
You won't get a single fucking LINK from me you kike

Not now, not ever

>> No.28005233

>>28004735
Newfags read this shit carefully. There will always be a flavor of the month shitcoin the only coins that matter are btc stablecoins and link not whatever you are holding

>> No.28005273

>>28005123
Based.

>> No.28005486

>>28004735
maffs

>> No.28005833

Probably effective FUD for the newfags here. For anyone that's not a complete retard, they will understand that the volatility associated with crypto will not allow you to effectively have a 5%, 10%, or even 50% stop loss. Because it will get triggered and then the coin will moon immediately after and you will be far worse off than someone who is just HODLing, as has been proven time after time by every big stack you see. Traders get rekt long term in 99%+ of cases, either by selling before a moon or buying before a dump

>> No.28006742
File: 129 KB, 500x766, EsqxqfwXAAUy2gi.jpg [View same] [iqdb] [saucenao] [google]
28006742

>>28004735
This applies only for boomer stocks. Cryptos risk/reward is jacked up to the tits though, therefore you need to be super generous with your stop. And calculate PnL in percentages well above 500%. I set my stop at ~ 25% depending on various factors. Also try and hide it so I don't get stop hunted like a moron. I turn it off alltogether for low mcap shitcoins like $RBC.

The only thing more important than this is position sizing. Eliminates your vulnerability to FUD and FOMO

>> No.28006780

>>28005233
>link
Lmao kys

>> No.28006865
File: 192 KB, 1024x737, 1611489658207.jpg [View same] [iqdb] [saucenao] [google]
28006865

>>28005833
This. OPs advice is basically retarded.

>> No.28006962

>>28005833
What the OP image probably means is that the stop loss should be for 5% of your balance no matter where it is set. This is exactly what I learned when I began to day trade (though actually we just never put more than 5% of our money into a trade), and if you are then an effective trader, your 5% gains will compound and make you big money in the long term. This also means, just like the OP image, if you take a loss, you don't have to work extra hard to break even afterwards.

>> No.28007389

>>28004735
thank you for trying to educate people.

for newfags who want to learn trading, I recommend cryptocred and technical roundup on youtube. it will tech you at the very least the basics.

>> No.28007465
File: 183 KB, 520x463, 1518639446859.png [View same] [iqdb] [saucenao] [google]
28007465

>>28004735
who cares about %? Am I retarded or is this observation a meaningless artifact of your choice to view price as %.
a loss of -100.0 will always be offset by a gain of +100.0, which is the real bedrock, so to speak.

>> No.28007581

>>28004735
>not a single mention of DCAing in OPs post
could be better 6/10

>> No.28008004

>>28004735
completely retarded advice lmao

>> No.28008717

Just buy and hold you dumb gorilla nigger. Buy the dips and fucking hold. If you're investing in gold projects like aave, atom, maker, link, and grt the price is irrelevant because 2-3 years from now when DeFi is eating market share from brand based finance you will regret selling. Just like everyone who sold bitcoin sub $100 sub $1000 and sub $10000. Eth sub $50 sub $200 and sub $900.

>> No.28009113

>>28007465
>>28007465
Well think of it this way, if you have $100 to trade and you decide to trade $50, and you lose it, you could try and make that $50 back with your new $50 balance in a single trade, but as you just learned it could fail leaving you with nothing.
Basically, you should always risk a consistent percentage of your account in each trade (otherwise you are saying as you lose more and more money you have more and more confidence in your ability to pick successful trades, which is literally just gambling, if you were going to put that final $50 -now 100% of your balance- into a single trade, why didn't you just put the original $100 into a single trade).

And that percentage should be 5%, because then you can (just about) break even from a failed trade with a single successful trade. If your rate of successful trades is 50%, then trading 5% of your account at a time, it will take an eternity to wipe out your balance, and if you improve your success rate to be 51%, suddenly you start making money which compounds over time
Trading is primarily an exercise in risk management, normies will never understand this because they lose $50 and then double down and get emotional

>> No.28009310

this is only good advicr for day trading right?

>> No.28009715

>>28009310
No, it's only good for stocks with low volatility, for both swing and day traders. It isn't good for crypto.

>> No.28010659

>>28009310
Yes it's ideal for any market, gold, oil, corn, bitcoin, FTSE, etc. There is literally no more widely applicable rule in all of finance

>> No.28011314

>>28004735
I agree holding is dumb, but a 1% or even 5% stop is pretty dumb in crypto. Unless you time it perfect you will almost always get stopped out due to the volatility