Whipsaw: The Song Remains the Same

By: Joseph Russo | Sun, Oct 2, 2011
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Markets in Whipsaw

What Does Whipsaw Mean?

Simply stated, a whipsaw market condition is present when a security's price heads in one direction then reverses sharply and abruptly in the opposite direction.

Derived from the push and pull action used by lumberjacks to cut wood with a type of saw with the same name, the term has become synonymous with large fast-moving head-fake-type swings in the financial markets.

Whipsaw is an ever-present challenge in the trading and investment arena. According to one of Jack Schwagers original Market Wizards Ed Seykota, the only way to avoid whipsaw losses is stop trading and investing. Disengagement may work for a time however; I do not believe that Seykota intended for people to interpret his quote as a serious solution.

Seykota, best known for his extremely successful trend-based strategies, concedes that each is subject to whipsaw drawdowns and losses. In addition to being one of the best-in-class trading systems developers, Seykota has musical talents and a rather keen sense of humor as well.

The video below is of Ed Seykota and his blue grass band performing "The Whip-Saw Song." Embedded within the artistic levity are numerous pearls of wisdom. Do enjoy.

 

If you want to get insight and exposure to successful trend trading strategies like those used by Ed Seykota, subscribe to the NAVIGATOR today.

Roller Coaster Ride of the Stock Markets

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2008 Financial Crisis Causes and Consequences

John Allison, Retired Chairman and CEO, BB&T Corporation recently spoke to the Harvard Law School Tea Party about the causes and consequences of the 2008 financial crisis.

The hour and a half C-Span coverage of the event is well worth the time. Allison's talk clarifies succinctly all that is going on in the global financial sphere and its impact on regional economies around the world.

Apart from the bounty of illuminating financial and political aspects of Allison's talk, the one thing that also struck a chord were his thoughts and philosophy regarding individuals' sense of purpose and self-esteem relative to their chosen career paths.

Deriving passion from ones chosen field of expertise aligned with a mission to assist others and make the world a better place is the underlying theme of Allison's philosophy.

After soaking in all of the shared wisdom, I asked myself three things:

  1. Am I passionate about my work?
  2. Am I assisting others?
  3. Am I attempting to make the world a better place?

Though there is always room for improvement on every front, to my delight, I was able to answer yes to each of these three essential questions.

Whipsaw


Nothing Risked-Nothing Gained

There is no way to avoid regular bouts of occasional and sometimes extended periods of whipsaw.

In a choppy market riddled with whipsaw, the only strategy that may deliver alpha is a successful counter-trend strategy however; they too are subject to their own brand of whipsaw.

Trade Better/Invest Smarter

 


Elliott Wave Technology provides a suite of Winning Solutions designed to assist those who wish to trade better and invest smarter based upon the practice and deployment of proven trading strategies in concert with expert and unbiased chart analysis.

 


 

Joseph Russo

Author: Joseph Russo

Joseph Russo
Chief Editor and Technical Analyst
Elliott Wave Technology

Joseph Russo

Since the dot.com bubble, 911, and the 2002 market crash, Elliott Wave Technology's mission remains the delivery of valuable solutions-based services that empower clients to execute successful trading and investment decisions in all market environments.

Joe Russo is an entrepreneurial publisher and market analyst providing digital online media solutions designed to assist traders and investors in prudently and profitably navigating their exposure to the financial markets.

Since the official launch of his Elliott Wave Technology website in 2005, he has established an outstanding record of accomplishment, including but not limited to, ...

  • In 2005, he elicited a major long-term wealth producing nugget of guidance in suggesting strongly that members give serious consideration to apportioning 10%-20% of their net worth toward the physical acquisition of Gold (@ $400.) and Silver (@ $6.00).

  • In 2006, the (MTA) Market Technicians Association featured his article "Scaling Perceptions amid the Global Equity Boom" in their industry newsletter, "Technically Speaking."

  • On May 6 of 2007, five months prior to the market top in 2007, though still bullish at that time, he publicly warned long-term investors not to be fooled again, in "Bullish Like There's No Tomorrow."

  • On March 10 of 2008, with another 48% of downside remaining to the bottom of the great bear market of 2008-2009, in "V-for Vendetta," using the Wilshire 5000 as proxy, he publicly laid out the case for the depth and amplitude of the unfolding bear market, which marked terminal to a rather nice long-run in equity values.

  • Working extensively with EasyLanguage® programmer George Pruitt in 2010 and 2011, the author of "Building Winning Trading Systems with TradeStation," he assisted in the development of several proprietary trading systems.

  • On February 11, 2011, he publicly made available his call for a key bottom in the long bond at 117 '3/32. Within a year and half from his call, the long bond rallied in excess of 30% to new all time highs in July of 2012.

  • For the benefit of members and his general readership, he responded to widespread levels of economic and financial uncertainty in the development of Prudent Measures in 2012.

  • He publicly warned of a major top in Apple on October 26, 2012 in the very early stages of a 40% decline from its all time high.

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