Mr C buys $1,000 worth of shares same as Mr A.
When they go down to $700 Mr C. sells.
But then regretting his decision he buys them back.
A and C now both have no cash and the same amount of shares.
But apparently Mr C. has lost money and Mr. A has not!
(For this hypothetical mind experiment lets assume no brokers' fees, no tax, no stamp duty.)
By removing all outside influence the case is the same. Mr A and Mr C have the exact same portfolio.
However, in the real world these factors matter. Most (all) investors experience decreasing stock values at some point. Both selling for either tax deduction (in a very bad year) and selling to offset gains (pay less tax) is a big part of investment strategy.
I understand it sounds crazy to most people saying that a $300 loss is only a potential loss, but the case isn't that simple in investment.