A falling knife is a term used to describe a sharp and continuous fall in the price of an asset.
29 Aug 2023, 17:44
A falling knife is a term used to describe a sharp and continuous fall in the price of an asset. If the asset is expected to rebound, either imminently or at some point in the near future, some traders might attempt to buy in the middle of the plunge. This is akin to trying to catch a "falling knife".
This is precisely why falling knives are dangerous. Whoever invests at this point is betting on a quick rebound which may or may not happen. When deciding whether to "catch" a falling knife, it's best to rely on technical and fundamental analysis rather than just emotions or "common sense"