Wednesday, July 6, 2011


When the market swings up and down on every bar stopping out every trade, its in whipsaw mode. Whipsaw can be triggered or aggravated by news as was the case today.

Normally whipsaw represents strong conflict but is definitely a trading range (b1-b7). The most likely outcome is a breakout and reversal (b10,11) leading to a trend (b11-b43).

The market is possibly in whipsaw if two long and two short orders have been stopped out (b1 long stopped below b2, b2 short stopped above b3, b3 long stopped below b4, b5 short stopped above b6). At this point, the best course is to stop trading and wait for a breakout and its reversal. Whipsaws rarely breakout and continue in the direction of the breakout (but it does happen occasionally)

A safer entry is the first pullback after a reversal (b16) or if the breakout is towards the ema, a fade of a two legged move to the ema.

Whipsaws early in the morning can have aftershocks in the PM (b68-b74), so caution must be exercised once the trend breaks (b43-48) and forms a trading range.


  1. HI Cad,

    How did you know b11 was reversal bar. Also did you do a limit order or a stop order.


  2. b10,11 is a down/up reversal. Ideally, they need to be of comparable sizes, but in the first hour you can make allowances. I used a stop oder 1t above b11