What is Whipsaw?

A trader is said to be 'whipsawed' when the price of a security suddenly moves in the opposite direction of a trade that he just placed.

How Does Whipsaw Work?

For instance, if a trader buys shares of Apple at $250/share, and over the course of the day the price drops to $230, the trader has been whipsawed.

Why Does Whipsaw Matter?

This usually occurs in a volatile market when traders are subjected to high risk. Short-term traders can be whipsawed often, but long term traders are likely to see better results over a longer time horizon.

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Paul Tracy
Paul Tracy

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 2 million monthly readers.

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