Whipsaw

AAA

DEFINITION of 'Whipsaw'

A condition where a security's price heads in one direction, but then is followed quickly by a movement in the opposite direction. The origins of term is derived from the push and pull action used by lumberjacks to cut wood with a type of saw with the same name.

INVESTOPEDIA EXPLAINS 'Whipsaw'

There are two types of whipsaw patterns. The first involves an upward movement in the share price, which is then followed by a drastic downward move, which causes the share's price to fall relative to its original position. The second type involves the share price to drop for a little while, and then suddenly, the price abruptly surges towards positive gains relative to the stock's original position.

RELATED TERMS
  1. McGinley Dynamic Indicator

    A little known technical indicator developed by John McGinley ...
  2. Rally

    A period of sustained increases in the prices of stocks, bonds ...
  3. Trend

    The general direction of a market or of the price of an asset. ...
  4. Volatility

    1. A statistical measure of the dispersion of returns for a given ...
  5. Crash

    A sudden and significant decline in the value of a market. A ...
  6. Reversal

    A change in the direction of a price trend. On a price chart, ...
RELATED FAQS
  1. What is a common strategy traders implement when using the Vortex Indicator (VI)?

    Traders primarily use the vortex indicator to spot trends, gauge trend strength and spot exit / entry points. The trading ... Read Full Answer >>
  2. What are the best technical indicators to complement the Parabolic Indicator?

    The best technical indicators to complement the parabolic stop and reverse indicator are the average directional index (ADX) ... Read Full Answer >>
  3. Why is the McGinley Dynamic Indicator important for traders and analysts?

    John McGinley developed the McGinley dynamic indicator to solve an important problem with moving average indicators – their ... Read Full Answer >>
  4. How do I use McGinley Dynamic Indicator to create a forex trading strategy?

    Forex traders can use the McGinley dynamic indicator much like they would use a moving average indicator – to identify trends ... Read Full Answer >>
  5. Why is the Parabolic Indicator important for traders and analysts?

    Another creation from famous technical innovator J. Welles Wilder Jr., the parabolic indicator signals exit and entry points ... Read Full Answer >>
  6. What are the best ways to protect trade positions against false signals?

    False signals are generated whenever an indicator provides an inaccurate reflection of market sentiment. Sometimes false ... Read Full Answer >>
  7. What burst the Mississippi bubble?

    In 1715, France was essentially insolvent as a nation. Even though taxes were raised to extremely high levels, the hole ... Read Full Answer >>
Related Articles
  1. Fundamental Analysis

    Where's The Market Headed Now?

    Whether up, down or sideways, learn about some of the factors that drive stock market moves.
  2. Investing

    Tips For Investors In Volatile Markets

    Find out what to look out for when trading during market instability.
  3. Mutual Funds & ETFs

    Understanding Volatility Measurements

    How do you choose a fund with an optimal risk-reward combination? We teach you about standard deviation, beta and more!
  4. Investing

    Turnaround Stocks: U-Turn To High Returns

    Find out which catalysts can turn struggling stocks around to create a tidy profit.
  5. Active Trading

    Do Adaptive Moving Averages Lead To Better Results?

    These complex indicators can help traders interpret trend changes, but are they too good to be true?
  6. Investing

    Prospering In The Next Bear Market: Here's How

    Prepare to survive, and even prosper, in the impending bear market, by considering and putting into action the following four strategies.
  7. Stock Analysis

    3 Stocks To Buy and Hold For the Rest of 2015

    One of the dominant themes to consider for 2015 is the normalization of monetary policy as the Fed raises interest rates.
  8. Economics

    Greece Isn’t The Only Problem U.S. Stocks Face

    Both stocks and bonds fell last week, due to several factors dampening investor sentiment. The most obvious one is the evolving situation in Greece.
  9. Investing Basics

    What Does Spot Price Mean?

    Spot price is the current price at which a security may be bought or sold.
  10. Investing Basics

    How Does a Dividend Reinvestment Plan Work?

    A dividend reinvestment plan allows investors to use their dividends to purchase more shares of the corporation’s stock, rather than receiving payment.

You May Also Like

Hot Definitions
  1. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  2. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  3. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  4. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  5. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
  6. Current Account Deficit

    A measurement of a country’s trade in which the value of goods and services it imports exceeds the value of goods and services ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!