Parabola

Parabola describes a market that moves a long distance in a short period of time, often moving in an acceleration pattern similar to that of a half parabola.

Parabolic motion can be upward or downward, but is usually upward.

When prices rise at an increasingly faster rate, they form a parabola, which should make us feel increasingly cautious.

With a parabolic move, we never know when the final top will come because of the frenzied buying that drives the move, but we do know that vertical moves cannot be sustained and eventually we can expect the parabola to collapse and prices to drop as fast as they go. Just as fast.

Parabolic uptrends are exciting, but there is almost certainly a danger that the rocket will run out of fuel, causing prices to collapse quickly.

It can be hazardous to your health to try to pick the final top on such a move, but being aware of the potential dangers is useful in managing your position.

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