Dead Cat Bounce Definition - Glossary

Dead Cat Bounce is a temporary recovery in asset prices before continuing downward. It misleads traders into believing a reversal.

Dead Cat Bounce is a temporary, minor recovery in the price of a declining asset. Often seen in markets, this phenomenon misleads investors into thinking a reversal is happening. However, it typically precedes further declines. The term suggests that even a dead cat will bounce if it falls from a great height. Traders should be cautious, recognizing that this bounce is often short-lived and not indicative of a long-term trend change. Distinguishing between a real recovery and a dead cat bounce is crucial for effective trading strategies.