A -17.75% week whose low arrived last, after the limit was already hit
Should a fund that cut ETH exposure at its fixed loss limit stay out through the week's close, or redeploy on any rebound day before the low is confirmed?
The market facts are real; the decision maker is illustrative.
The week and the position
In the week of 31 August 2020, ETH fell 17.75%, from 428.94 to 352.80, with a 13.22% drop on Thursday 3 September and a weekly low of 308.42 reached late on Saturday 5 September, after Tuesday's high of 488.84. Volume was 3.38 times its prior 12-week average, the close sat in the lower third of the week range, and the week ranked in the 10th percentile of 133 weeks of history. An illustrative fund hit its fixed loss limit and cut exposure mid-week. Perpetual funding stayed positive, averaging 0.0179% per eight hours, and ETH underperformed BTC by 5.33 percentage points.
Judgment
Keep the exposure cut through the weekly close. The week's structure defeats a mid-week re-entry: the high came Tuesday and the low came last, so any rebound bought after Thursday's 13.22% fall was met again by Saturday's low. The 10th-percentile return, the 26.92% distance below the 52-week high and ETH's 5.33-point underperformance of BTC argue the limit was struck in the right direction. Accept being out while longs pay 0.0179% per eight hours in funding on average; that cost of holding longs does not compensate for a week whose range ran 58.5%.
What would change it
If a later week closes above this week's open of 428.94, the loss limit can be reset and exposure restored by the fund's written rule. If the fund's rule already fixes a re-entry price, follow it rather than this judgment.
What sets this case apart
The decision turns on the order of the week's extremes, high before low, which makes every rebound after the loss cut a candidate for the next leg down.