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falling knife
What does falling knife mean?
A falling knife is a security whose price is dropping fast and steeply. Traders warn each other not to try to buy it until it has clearly bottomed.
"That chart is a falling knife; don't touch it until it bases."
Origin
From the trader's caution about 'catching a falling knife.'
Frequently asked questions
What is a falling knife in stocks?
It's a security whose price is dropping fast and steeply — one traders warn each other not to buy until it has clearly bottomed.
Why do traders avoid a falling knife?
Because trying to buy one mid-plunge ('catching a falling knife') often leads to further losses if the decline continues.
Where does the term come from?
From the trader's warning about 'catching a falling knife' — grabbing something dropping fast will cut you.
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