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.
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Cached on May 24, 2012, 11:35 am