Understanding a Dead Cat Bounce in Financial Trading

LONDON, August 5, 2011 /PRNewswire/ --

The second week of July saw European banks recovering slightly after a sharp bearish movement over the last 4 months. RBS, Barclays, Lloyds and UniCredit all saw positive movement, with rises ranging from 5% to 10%. While some traders saw this as a sign the sector may finally be recovering, others saw a potential "dead cat bounce."

The Dead Cat Bounce

The term "dead cat bounce" comes from the idea that "even a dead cat will bounce if it falls from a great enough height." The phrase has long been used on Wall Street and financial trading in general to describe a short rise in the price of a declining stock, which then continues to decline past the prior low.

Because its signs could also indicate the beginning of a reversal pattern, a dead cat bounce can only be recognised for certain with hindsight. Whether the European banks ultimately continue to recover remains to be seen and for traders the bottom line must be to proceed with caution.

Spread betting provider City Index provides a range of risk management tools to help you trade safely and securely. Find out more about the stop losses, limit orders, charting packages and mobile trading platforms on offer at http://www.cityindex.co.uk/

Spread betting and CFD trading are leveraged products which can result in losses greater than your initial deposit. Ensure you fully understand the risks.

About City Index:

Today more and more individual traders are discovering the benefits of derivatives, and many of them are discovering them through a City Index trading platform.

As a group, we transact in excess of 1.5 million trades every month for individuals in over 50 countries worldwide. We provide access to a wide range of instruments including margined foreign exchange, CFDs and, in the UK, spread betting.

We constantly look to widen the range of assets we offer, improve the performance of our platforms and expand the range of services we provide. The result is that our customers benefit from innovative trading tools with transparent pricing, competitive spreads, and a high standard of customer service and support. For more information, visit http://www.cityindex.co.uk/spread-betting/start-spread-betting.aspx

SOURCE City Index

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