#MarketPullback
We are programmed to Lose!
Read and understand why we are already at a disadvantage with volatility in the financial market. 📈
It seems so obvious, but in the world of finance, price fluctuations are a constant reality. Let's better understand how these variations negatively affect our capital:
Initial Scenario:
- You invest $1,000 and the market drops 50%, your capital is now $500, right?
Then the market recovers and increases 50%, your capital does not return to $1,000, but to $750, because the increase occurred on the $500 that was left.
In short: You are still losing $250 compared to the initial investment. Why?
When the value of your investment drops by half, it needs to double to return to its initial value. A 50% increase after a 50% drop does not fully recover the loss, because it is calculated based on a smaller value (the remaining $500).
Remember that the same math applies when the market goes up and then down. We will still lose $250.
Tip: It is important to be aware of these dynamics when investing in #Criptos and consider risk management strategies. That is why I always recommend using Stop Loss, as a way to protect your capital.
Have a great weekend everyone!
