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.