Falling knife

Example

Say a stock plunges from $80 to $64 in three sessions, and a trader buys 100 shares because a 20% drop looks cheap. The knife keeps falling to $52 before it stops, leaving the position down $1,200. Waiting for a sign that the drop has ended, such as a first higher low, means missing the exact bottom, but it also means not buying mid-plunge.

Hypothetical numbers, for illustration only.