The forex market can move dynamically, besides creating profit opportunities, price volatility can cause losses.
Various patterns and market behavior can occur in a trading asset, one situation that often causes trader losses is whipsaw.
Whipsaw describes a situation where the price of an asset moves quickly in a certain direction, then suddenly reverses direction. whipsaws can make it difficult for traders to identify long-term trends and make sound trading decisions.
In general, Whipsaw occurs due to market volatility and information uncertainty which causes prices to move up and down significantly in a short time. The price of a pair may rise quickly and at that time the trader will think that the upward trend is very strong, but after he opens a buy, the price may rise temporarily but then fall very quickly so that the trader who was open buying will be dragged into floating losses.
So how to identify Whipsaw? This is hard to identify before anything happens, but traders can approach the market both technically and fundamentally. Before opening a position, pay attention to whether the price is overbought or oversold. When the price enters the overbought zone, it may decline, conversely, if the price enters the oversold zone, the price may soar. Apart from that, pay attention to fundamental news, Whipsaw may occur when positive economic data pushes prices up, but there is other news, for example, the country's central bank announces a policy that is not in line with market expectations, prices can fall even though they previously rose.
Whipsaw is often an unfavorable situation for a trader because he will feel trapped in a loss. However, traders can try to avoid this by researching the pairs being traded, conducting analysis, and making a trading plan, avoiding overtrading because it will increase transaction costs.
Learning Whipsaw in forex trading is very important and helps traders to identify and manage risks so they can make the right decisions.
To understand more about Whipsaw you can read this topic here
Various patterns and market behavior can occur in a trading asset, one situation that often causes trader losses is whipsaw.
Whipsaw describes a situation where the price of an asset moves quickly in a certain direction, then suddenly reverses direction. whipsaws can make it difficult for traders to identify long-term trends and make sound trading decisions.
In general, Whipsaw occurs due to market volatility and information uncertainty which causes prices to move up and down significantly in a short time. The price of a pair may rise quickly and at that time the trader will think that the upward trend is very strong, but after he opens a buy, the price may rise temporarily but then fall very quickly so that the trader who was open buying will be dragged into floating losses.
So how to identify Whipsaw? This is hard to identify before anything happens, but traders can approach the market both technically and fundamentally. Before opening a position, pay attention to whether the price is overbought or oversold. When the price enters the overbought zone, it may decline, conversely, if the price enters the oversold zone, the price may soar. Apart from that, pay attention to fundamental news, Whipsaw may occur when positive economic data pushes prices up, but there is other news, for example, the country's central bank announces a policy that is not in line with market expectations, prices can fall even though they previously rose.
Whipsaw is often an unfavorable situation for a trader because he will feel trapped in a loss. However, traders can try to avoid this by researching the pairs being traded, conducting analysis, and making a trading plan, avoiding overtrading because it will increase transaction costs.
Learning Whipsaw in forex trading is very important and helps traders to identify and manage risks so they can make the right decisions.
To understand more about Whipsaw you can read this topic here
