Whipsaw
19 hours agoA whipsaw is a colloquial term used by traders to describe a situation in a highly volatile market where a sudden price movement is quickly followed by a sharp reversal.
At times, prices fluctuate erratically without any clear reason. This type of price action is marked by violations of trend lines, false breakouts, and unpredictable behavior.
The term whipsaw originates from the “push and pull” motion of the saw that lumberjacks use when cutting timber.
A trader is said to be “whipsawed” when they are in a trade and the price moves in one direction, only to unexpectedly shift in the opposite direction.
For instance, if a forex trader purchases EUR/USD at 1.1200, and during the day the price falls to 1.1050, the trader has experienced a whipsaw.
Whipsaws typically occur in choppy markets. Short-term traders may frequently encounter whipsaws, while long-term traders are likely to achieve better outcomes due to their extended time frame.
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