If a stock drops by 20%, how much does it need to rise to get back?
At first glance, the answer seems to be 20%.
But no.
Let’s imagine the stock cost $100.
It fell by 20% → it’s left with $80.
To get from $80 back to $100, it needs to increase by 25%.
So:
$100 → -20% → $80 → +25% → $100
Why is that?
Because the percentage is calculated based on the new, lower value.
And the more an asset drops, the more it needs to rise to recover:
-10% → +11.1%
-20% → +25%
-50% → +100%
-70% → +233%
That’s why a 50% drop is not a situation you can fix with an ordinary 50% rise.
In my view, this is one of the most important things to remember when assessing risk:
percentages down and up are not symmetrical.
#Trading #Investing
At first glance, the answer seems to be 20%.
But no.
Let’s imagine the stock cost $100.
It fell by 20% → it’s left with $80.
To get from $80 back to $100, it needs to increase by 25%.
So:
$100 → -20% → $80 → +25% → $100
Why is that?
Because the percentage is calculated based on the new, lower value.
And the more an asset drops, the more it needs to rise to recover:
-10% → +11.1%
-20% → +25%
-50% → +100%
-70% → +233%
That’s why a 50% drop is not a situation you can fix with an ordinary 50% rise.
In my view, this is one of the most important things to remember when assessing risk:
percentages down and up are not symmetrical.
#Trading #Investing
