Whipsaw – And There Go Your Shares

If you’ve never been “whipsawed” before well…..you sure where today.

Whipsaw – A condition where a security’s price heads in one direction, but then is followed quickly by a movement in the opposite direction. The origin of the term, is derived from the push and pull action used by lumberjacks to cut wood with a type of saw with the same name.

There are two types of whipsaw patterns. The first involves an upward movement in the share price, which is then followed by a drastic downward move, which causes the share’s price to fall relative to its original position. The second type involves the share price to drop for a little while, and then suddenly, the price abruptly surges towards positive gains relative to the stock’s original position.

Now I’ve been suggesting that the big boys have been quietly buying behind the scenes for several days, but today may well have been the first day that their activity was clearly seen by all. What did you think – a bunch of angry hippies (with their trade signals now honed to perfection) all got the same green light this morning to “buy like the wind”? Or better yet – some rinky-dink investment group of a couple angry old men (with actual belief that their combined buying power is sure to move the needle) all pooled their beer money and “rocked the markets” today?

Please…these characters are the largest contributors to the entire process, as once again weak hands are whipsawed and BAM! – There go your shares!

The short dollar positioning begins….as whatever gas the dollar may still have left will sputter out quickly – here in the days ahead.

12 Responses

  1. kreks November 28, 2012 / 4:15 pm

    Are you going long risk already Kong? With a wide stop I’m guessing?

    I think I’m more cautious (or is that scared?) than you … just a one day bounce off 80 for the DX doesn’t make me very comfortable. I’ll wait for DX to either rise a bit more of break below 80 support.

    • Forex Kong November 28, 2012 / 4:21 pm

      No no……Im not putting anything on this second Kreks – but will be pulling charts / plotting lines etc here in the next 24 hours.

      I too expect to get just as good an opportunity in waiting longer to see if the ol buck “pops” a lil higher -and gives me my Xmas present early.

      • kreks November 28, 2012 / 4:40 pm

        It’d be great to hear sometime about how you prepare for a trade… always interesting seeing what other traders do!

        • Forex Kong November 28, 2012 / 5:08 pm

          Well….I do plan to roll this out formally in coming months – along with a proprietary trade trigger (for MT4, as well Etrade and TOS platforms) and a backend support/trade room etc.

          But for now – I can tell you this. I’ve got next to no indicators on screen – but do draw many, many MANY lines of horizontal support and resistance that remain on the charts for months at a time. I can’t tell you how many times I enter/exit…and in turn see price return to these “pre drawn lines”.

          Otherwise….I am a real “price follower” – and will often have orders “sitting and waiting” above current prices…(allowing momentum to pick them up) – if they get hit – chances are that price has moved large enough – and suggests further momentum – good for now?

  2. kreks November 28, 2012 / 8:43 pm

    Yeah i didn’t figure you for much of a chart patterns/indicators type of guy! Perhaps we all start out this way, but I think most succesful traders end up following the price action and developing an almost ‘instinctive’ read market pscyhology.

    I also rely a lot on horizontal support / resistance lines, though am still struggling with making full use of the fading opportunities touches of those lines bring. Same with momentum moves that blow through those lines! That’s one of the things with trading, there is always room to improve!

    • Forex Kong November 28, 2012 / 9:03 pm

      I bet I went through every single strategy / concept / indicator on the planet – before finally throwing them all out and finding what worked for me – and yes I imagine we all start out that way. I do pay attention to patterns (to a certain extent) as well have a keen eye for candles and their implications.

      As well – two of the most overlooked and rarely discussed/taught – pure fundamentals and of course trade psychology – areas I have spent countless hours improving/working on. Eventually (I think you’ve got it right) things do become somewhat “instinctive” as the combination of skills learned and experience start to finally fold together.

      Sticking with it is really the key…and the learning never, never ends.

      Sounds like you are well on your way – and will likely do great moving forward.

  3. schmederling November 28, 2012 / 10:44 pm

    I have found that bollinger bands, keltner channel & AweOsc work amazing providing extreme…. extreme precision for market movements up & down with the AO for long, short positons & exits or profit taking….

    • kreks November 28, 2012 / 10:48 pm

      What is the AweOsc… never heard of it and nothing comes up on google?

  4. schmederling November 28, 2012 / 10:51 pm

    Awesome oscillator

    • kreks November 28, 2012 / 10:54 pm

      Yeah right, moving average based. Glad you find it useful, but it’s not my cup of tea!

  5. schmederling November 28, 2012 / 11:08 pm

    Its great on histogram…. great for entry & exits when BB burst through KC (momentum)……. depends on how you have used it and with what ind’s & setting…. I use this set-up to create some quick revenue usually in a 5 min… works on all time-frames…. very little else works for me… to each his own..


    • Forex Kong November 29, 2012 / 7:15 am

      All the Bill Williams stuff is great – and yes is about the best prefab type plug and go type indicators available for MT4.

      I don’t use any of it – but have tried it out, and have also heard lots of other traders are pleased with it.

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