The term whipsawed is used for a trader when the price of a security suddenly moves in the opposite direction of a trade he has just placed. This term basically originated from the push and pull action that are performed by lumberjacks to cut wood with a type of saw with the same name. Whipsaw patterns are of two types – the first involves an upward movement in the shares prices which then suddenly takes a downward move, causing the share’s price to fall relative to its original position. In the second type of whipsaw pattern, the price of the share drops for a little while and then it drastically surges towards positive gains relative to the stock’s original position. Whipsaw usually occurs in a volatile market where the traders are subjected to high risks. Although short term traders are often whipsawed, the long term traders are likely to see better results over a longer time period.

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Edited and Updated 31st May 2014

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