Falling Knife
19 hours agoThe term “falling knife,” also referred to as “catching a falling knife,” describes the act of purchasing an asset that is experiencing a rapid decline in price.
While a falling knife indicates a sharp decrease, there is no defined extent or duration of the drop that qualifies a price movement as a “falling knife.”
This phrase is typically used as a warning against hastily buying an asset while its price continues to fall.
For instance, the saying “Don’t try to catch a falling knife” suggests that one should “wait for the price to reach its lowest point before making a purchase.”
However, if you time it perfectly, you can indeed “catch the falling knife”! 🤑
This implies that you managed to buy the asset right at or very near its lowest point! Cha-ching! 💰💰💰
Just be aware that attempting to catch a falling knife is a highly risky endeavor, much like trying to catch an actual falling knife!
While it is possible to catch a real falling knife, it takes a certain level of recklessness to attempt it.
In reality, most attempts to catch a falling knife by traders end in failure and often lead to significant losses. 💀
Instead of trying to “catch the falling knife,” traders should seek confirmation of a trend reversal through technical indicators and chart patterns.
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