Whipsaw
This term may trace its origins back to a woodcutting tool, but it is better to concentrate on the “whip” part of the name.
A whipsaw is a trading signal that gets reversed immediately. How can that be? Technical signals and systems should not do that. Well, the truth is that they can. There is always that trade-off between sensitivity and risk as you want your indicators to tell you to act, but you do not want them to constantly fire. If you use less sensitivity, they fire less often, and you miss opportunities. If they are too sensitive, then they fire a lot, and while you will catch every signal, you will also fall victim to market noise and trading losses.
There are many indicators from which to choose, and some work better in certain ...
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