Why is a Falling Knife So Risky?

[Suba]

The term "falling knife" is adopted from the stock market, where it is described as a trap for investors and traders who rush to buy crypto whose prices have fallen significantly in a short period of time.

Without adequate skills, catching a falling knife is likely to injure oneself. Similarly, in the investment world, buying crypto without calculation or analysis can be very detrimental and risky for several reasons:

1. There's no guarantee that the price will recover quickly.
2. Investors perceive the trap as a golden opportunity to adopt as much crypto as possible, but unexpectedly, the crypto market will continue its bearish trend.

 

[gwolf666]

The concept of the "falling knife" perfectly captures the risks of hastily investing in assets that have suffered significant declines in a short period of time. In the case of the crypto market, this strategy can be extremely dangerous without experience or prior analysis. Many investors view the fall as a unique opportunity to buy cheap, but the reality is that there is no guarantee that the price will recover soon. Acting impulsively can result in considerable losses if the market continues to trend downward. Therefore, it is essential to combine technical analysis, an understanding of market patterns, and a clear risk management strategy before making investment decisions. Patience and discipline are key; waiting for clear signs of stabilization or upward trends can protect capital and increase the likelihood of success instead of falling into the trap of trying to "catch the knife."