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Whipsaw

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A whipsaw occurs when a buy or sell signal is reversed in a short time. Volatile markets and sensitive indicators can cause whipsaws.

For example, a whipsaw would occur if a position trader initiates a long position on a bullish MACD crossover and has to close it the next day because of a bearish moving average crossover. The signal was reversed and the trader had to exit quickly.

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Written by Emerald

July 15, 2008 at 3:53 am

Posted in Glossary

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