How do you catch falling knives?

Discussion in 'Risk Management' started by Port1385, Mar 14, 2009.


    Netscout is a perfect falling knife to catch. It was downgraded by Cramer and Needham at the same time causing a panic sell-off.

    This would have been a good one to catch on Friday for, at least, a short-term two-day trade. However, not all stocks falling off the cliff act like Netscout. Some of them keep going down for days afterword.

    So how do you catch a falling knife? What do you do to evaluate the situation during and after the big fall from grace? I might note that the bottom was in the 5s and it came back up to the 6s and then to the 8s in after hours. That would have been an incredible trade to make in the 5s. Even if you sold all in the 6s, then you would have been up a good deal within hours...
  2. Trying to catch a falling knife is not a good thing.

  3. You catch it right in the heart most of times.......wear armour and maybe you survive this knife attack.

    I would try to grab the handle on the way back up as that side is not as sharp and you can hang on for the ride.
  4. "How do you catch falling knives?"

    Simple--you let someone else take the hit, yank the knife out of their back and run with it.
  5. nysestocks

    nysestocks Guest

    If you trade Mickey Mouse stocks, then only expect Mickey Mouse returns!

    Which is easier to follow in the jungle - the mouse or the elephant?
  6. lundy


    easy to do with L2 and fast internet.... used to have a screener that spit out stocks falling 2 points in 1 minute... those were buy candidates, stops of 5-15 cents or less, of course, they weren't hard stops, needed had nible fingers and lots of hotkeys...

    overall works well, but u need tough discipline, as sometimes multiple entries are needed and u have to know when to cut em.

    of course, was usually out of them after a 40-60 cent bounce.
  7. I do this in Forex.
    The key is to get out fast as soon as it's not going your way. May be get ticked away 3 times 10 pips but catch a 50 pips on the fourth. I use the tick chart.
    Also, as soon as I can I lock in a free trade, move a stop to a no loss and trail it.
    I dont fuck theses things naked, I always protect myself with a stop.
    Never forget that the knive is faling and he can continue with you hanging onto it.
    Know when to take profits or ride.
  8. Do yourself a favor by avoiding such unprofessional approach. It's not worth it
  9. Well Said. V-reversals can be tough to trade. I buy(short) some qunatity based on L2 then add if suported by charts. Today BAC,C,MBT were a good trade at pre-market(EDIT). I doubt when we shall see such high prices again.

    can you please provide links if such scanners are available commercially.
    #10     Mar 19, 2009