Understanding Falling Knife

Explain : Falling Knife

A falling knife is a colloquial term for a rapid drop in the price or value of a security. The term is commonly used in phrases like, "don't try to catch a falling knife," which can be translated to mean, "wait for the price to bottom out before buying it." A falling knife can quickly rebound - in what's known as a whipsaw—or the security may lose all of its value, as in the case of a bankruptcy.

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