Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Whipsaw

What it is:

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 it works (Example):

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 it Matters:

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.