August 30th, 2021 | Updated on March 7th, 2022
The falling knife stocks represent the stocks that have felt a speedy decline in the price and it happened in a short time. A ‘falling knife’ is a metaphor for the quickly sinking in the price of stocks. Also, it could happen with other assets too.
That means be prepared but wait for the price to bottom out before you buy it. Why is this so important, why to wait for the stock price to bottom out? Well, the falling knife can rebound quickly. That is called a whipsaw. But also, the stocks may fail totally, for example, if the company goes bankrupt.