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Whipsaw

AnalyticsTrade Team
AnalyticsTrade Team Last updated on 27 Apr 2023

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Whipsaw

Whipsaw is a term used to describe a situation in the financial markets where a security or index experiences a sharp and sudden price movement in one direction, followed by a sharp and sudden price movement in the opposite direction. This type of price action is often seen in volatile markets, and can be caused by a variety of factors, including news events, economic data releases, and changes in investor sentiment. The term is derived from the saw-like motion of a whip, which is characterized by a quick, sharp movement in one direction followed by a quick, sharp movement in the opposite direction.

History of the Term

The term “whipsaw” has been used in the financial markets since at least the early 1900s. It was first used to describe the sharp and sudden price movements of stocks on the New York Stock Exchange. The term has since been adopted by traders and investors to describe similar price movements in other markets, such as currencies, commodities, and derivatives.

Comparison Table

Market Volatility Likelihood of Whipsaw
Stocks High High
Currencies Medium Medium
Commodities Low Low
Derivatives High High

Summary

Whipsaw is a term used to describe a situation in the financial markets where a security or index experiences a sharp and sudden price movement in one direction, followed by a sharp and sudden price movement in the opposite direction. This type of price action is often seen in volatile markets, and can be caused by a variety of factors, including news events, economic data releases, and changes in investor sentiment. For more information on whipsaw, investors can visit websites such as Investopedia, The Balance, and MarketWatch.

See Also

  • Volatility
  • Market Sentiment
  • Technical Analysis
  • Price Action
  • Trend Trading
  • Range Trading
  • Momentum Trading
  • Breakout Trading
  • Reversal Trading
  • Scalping

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