“Catching the knife” is buying an asset that is falling sharply, hoping that it will now turn around and go up.
🚨 Why is this risky?
1️⃣ The fall may continue - the asset falls even lower, and instead of profit you get -50% or liquidation.
2️⃣ Rebounds are short-lived – even if the price has jumped a little, it can then fall even more.
3️⃣ The market rarely turns around immediately – usually a sharp drop is followed by a flat or another strait.
✅ How to avoid this trap?
🔹 Wait for confirmation of the reversal (volume growth, price stabilization).
🔹 Use stop-losses.
🔹 Look at support and liquidity levels.
🔹 Enter in parts, not the entire amount at once.
A good trader doesn’t catch knives – he waits for the knife to fall and picks it up without risk! ⚡
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