A loss that results from a security making a sudden reversal immediately after a position is taken. The whipping action takes places when the price quickly moves through the moving average upward and downward, leading to a series of back-and-forth trades. Whipsaws are usually observed in a sideways market where trades are uncertain about trend direction. Traders can avoid whipsaw losses by making a moving average as long as possible (though making it as short as possible is necessary to identify the start of a trend).
February 22, 2024
