Dead Cat Bounce

A Complete Guide

but as long as you hear it mentioned within the context of trading, it refers to a particular phenomenon in the stock market

The idea of a “dead cat bounce” might sound somewhat alarming,

The phrase comes from the idea that even dead cats will bounce if they fall from a high enough point.

When asset prices reach high levels and then drop, they may recover temporarily.

Why should you care?

Because, by following backtested trading strategies, you can use them to make a profit.

What is a Dead Cat Bounce?

When a stock price decreases, it rarely just hurls straight down without experiencing a few peaks along  the way.

it may seem to undergo a slight recovery before returning to its previous low.

One extreme example of this is the dead cat bounce: when a stock price decreases,

What are the Causes?

A bounce happens when pessimism begins to set into a bear market.

If the market continuously displays a downward trend for weeks on end,

the conditions for a bounce begin to foster.

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