Knife Catching (Catching a Falling Knife)

The risky practice of buying a stock or other asset while it is in freefall, hoping to time the bottom. The Wall Street adage "don't try to catch a falling knife" warns that prices in decline can always go lower, and what looks cheap today may be worthless tomorrow. Disciplined traders prefer to wait for confirmation of a reversal -- such as a pattern of higher lows or a surge in buying volume -- before stepping in.