A shortened version of the colloquial term “don’t try to catch a falling knife.” When it comes to trading, this term translates to “wait for the price to hit a bottom before buying it.” There is no defined amount a stock must fall in order for it to be considered a falling knife. Many traders will attempt to take advantage over a falling knife situation, but often in the form of a short position with the assistance of technical indicators.
We don't know everything about the markets. We're just devoted to learners. Taken from those smarter than ourselves, here's how we define “Falling Knives”.