Losses before and after the fact

• I am negative about cutting one’s losses in stock investments, etc.

  • Most of the world’s explanations for loss control seem to be written by people who have never thought about it properly on their own.
  • But there are “good losses” too, what’s the difference?
  • I realize it’s either before or after.

• Losses include Prior Losses and ex post facto losses.

  • An advance stop-loss is one in which you decide in advance that you will close the position if it drops 10%.
  • Ex-post loss is a position eliminated after the fact because “the stock price has fallen”.

• An advance stop-loss is one in which you decide in advance that you will close the position if it drops 10%.

  • When the risk tolerance for this position is 10% of the investment, it is rational to limited risk by deciding in advance that you will exit when the risk tolerance drops to 10% of the investment amount.

• Ex-post loss is a position eliminated after the fact because “the stock price has fallen”.

  • The decision to buy a good at a certain price X is a decision that the value of the good is greater than X.
  • Selling goods at a lower price y than that is not consistent with the decision.

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