A 10.54% rebound day inside a 21.89% losing week tests a loss-limit rule
Should a fund that cut its BTC exposure at its loss limit buy back on Thursday's rebound, or wait for the week to close before resetting its limit?
The market facts are real; the decision maker is illustrative.
The week and the position
In the week of 7 November 2022, BTC fell from 20,905.58 to 16,329.85 (-21.89%), with a 14.14% fall on Wednesday followed by a 10.54% gain on Thursday. An illustrative fund cut its exposure on Wednesday when its loss limit was hit. The market was already 75.25% below its 52-week high, and of the four previous weeks three had risen and one had fallen, with returns of -0.91%, 1.6%, 5.4% and 1.35%.
Judgment
A rebound day is not evidence that the loss limit was wrong. Keep exposure reduced through the week's close and re-enter only by a rule written before the event, such as a fixed fraction after the weekly close. Buying back on the best day of a falling week risks paying for the rebound and then meeting the next fall at full size.
What would change it
If the fund's written rule already allows re-entry once price recovers a stated share of the fall, following it on Thursday is consistent. If a later week closes back above this week's open of 20,905.58, the limit can be reset.
What sets this case apart
This is about re-entry discipline after a forced cut, not about forecasting the bottom.