Whipsaw

A whipsaw is a market condition characterized by sharp, rapid price reversals in quick succession, causing traders who enter on a perceived breakout or trend signal to be immediately stopped out as the price reverses direction. Whipsaws are particularly dangerous for trend-following strategies during choppy, range-bound conditions where there is no clear directional momentum. They often occur around major news events or during low-liquidity periods when small orders can exert outsized influence on price. Using wider stops, avoiding overtrading in ranging markets, and waiting for confirmed high-probability setups helps reduce whipsaw-related losses.