What is a catch the falling Knife Trade
The Catch a falling knife Forex Trade is a trade made when you are trading against a very strong trend for no reason whatsoever. Every bit of information thrown at you says sell, sell, sell and yet you buy.
What they look like
They look like madness trades and many think the following are reasons for these trades:-
- The Trader is an incurable adrenaline junkie
- The Trader has a death wish
- The trader pressed the wrong button
- ……etc
The Real danger
The danger with this trade is that not only will it take considerable resistance to stop a strong trend but there need to be consider effort to reverse the direction. A real power punch need to turn a strong trade around in its track.
Not really that difficult
The long term traders that do this however are not as maverick as people think. They use very advanced Support and Resistance test and retest techniques to filter out most of the risk out of these trades. They also are aware of important announcement and market opening times that give these trades the bounce and volatility they need. To them the trade is a calculated risk trade with the odds actually stacked in the traders favor.
Double in a Day trade example
Not only was the trader cheeky enough to do a falling knife trade buy it turned into a Double in a Day trade where 5% was risked to make 105%.
The first chart shows the AUDJPY in a strong downward trend and the second chart shows that there were some support and resistance and time of day aspects used to confirm this bounce.
A 4 hour view
A closeup 5 min view
Another view
http://www.investopedia.com/terms/f/fallingknife.asp
Discussion and questions
Please use the forum where this article is also posted under successful DIAD trades to make comments and ask questions
Warning:
Kids please do not do this a home
