Stop cascade
Why does a price fall sometimes accelerate as it passes levels where many stop-loss orders sit?
In plain words
A stop cascade happens when a price moving through a crowded band of stop-loss orders triggers those stops, which place their own market sell orders, pushing price into the next band below and repeating the process. Each cluster acts as fuel for the move rather than a floor.
Why it matters
A cascade explains why a market can slice far past a level that looks like support, and why the resulting move is faster than the news behind it. Traders who place stops at visibly round or widely watched levels are more likely to sit inside such a band, and the market's own depth thins out during fast moves, letting small orders travel far.
In a real week: BTC, week of 27 July 2020
In the week of 27 July 2020, BTC ranged 22.25%, from a low of 9917.21 on Monday to a high of 12123.46 at 04:00 UTC on Sunday. At that same hour it recorded its largest one-hour move, -6.92%, and closed the day -6.18%, its worst day of the week. Volume reached 1.81 times the prior 12-week average (dollar volume 7.05bn), and the close finished in the middle third of the range at 52.3.
A common mistake
Treating every fast move as a cascade. The data shows the speed and location of a reversal, not the stop orders themselves, so a cascade is one plausible reading, not a confirmed one.