3 ms·
"never catch a falling knife"
by arez 7y ago
"never catch a falling knife"
- PaulHoule 7y agoThat's a slogan of pro traders who have three problems: (1) They trade on margin, so huge drops are much more dangerous to them (2) Their boss sees a Profit & Loss for the trading day that evening, if they don't like what they see they might give their portfolio to somebody else. (3) Customers are calling the sales desk and they want to sell; hopefully sales can slow them down, but you may need to sell to pay for redemptions. Many customers may need to sell to rebalance their portfolios, get liquidity, etc. This is a mechanism which can carry instability from one market into another one which would otherwise be doing just fine.