Whipsaws

[GOTOHAVEIT]

Hi There
great site very interesting,could someone explain to me what a whipsaw is please. thanks

 

[DTM]

Its the new Black Decker wood saw that has industrial applications.

 

[markrmau]

lol.

Goto. Just say you had a purely mechanical system. Buy if close was above 10 day moving average (DMA), sell when it drops below 10 DMA. This might be profitable, but notice how noisy the share price signal is. Some days you will sell, only to be told to buy again the next day. These are whipsaws.

 

[tech/a]

Common with shorter timeframes.

Where you buy expecting price to move in one direction only to find that it reverses and moves in the other direction,beyond and below your buy and or stop point.

The longer the timeframe the less common the whipsaw as you stay in the trade during these (often) short term corrections.

There are some trading Stratagies based around a little longer term "Whipsaws" Eg Swing Trading some options plays.