Last Updated on: 14th February 2021, 10:13 am
A whipsaw is a slang term used by traders that describes the condition of a highly volatile market where a sharp price movement is quickly followed by a sharp reversal.
Whipsaw comes from the “push and pull” action of the saw that lumberjacks use when cutting wood.
A trader is considered to be “whipsawed” when in a trade and the price is moving in one direction but then unexpectedly moves in the opposite direction.
For example, if a forex trader buys EUR/USD at 1.1200, and over the course of the day the price drops to 1.1050, the trader has been whipsawed.
A whipsaw usually occurs in a choppy market. Short-term traders can be whipsawed often, but long-term traders are likely to see better results due to their long time horizon.
Vincent Nyagaka is a Professional Trader, Analyst & Author. He has been actively engaged in market analysis for the past 7 years. He has a monthly readership of 100,000+ traders and has taught over 1,000 students since 2014. Vincent is also an experienced instructor and public speaker. Check out Vincent’s Professional Trading Course here.