Imagine that you are losing money in the stock market. Using your investment strategy, your initial investment of X dollars leads to a loss of $100:
Investment Strategy ($X) = $X – $100
An example of such a strategy might be to sell stocks upon reading bad news of a company whose stock you own, and buying stock upon reading goods news of a company whose stock you do not (Niederhoffer, in Practical Speculation).
You might think that reversing your strategy, doing the opposite of what you were doing, might lead to a gain of $100 instead. So instead of selling/buying upon hearing bad/good news, you buy/sell upon hearing bad/good news. Will that strategy then lead to a gain of $100?:
Investment Strategy-1 ($X) = $X + $100
Categories: Business and Finance
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