Whipsaw

A whipsaw is price crossing a level in one direction and then back in the other within a short stretch of chart, so that anything keyed to the crossing is triggered and then contradicted. The word is used for the movement itself and, by extension, for what it does to a rule that reads the chart mechanically: a moving-average cross, a break of a drawn boundary, an instruction resting just beyond a level. Whipsaws are not a defect in the chart or in the rule. Any rule that fires on a threshold will fire when price moves across that threshold, however briefly, and the chart has no way of distinguishing a crossing that will hold from one that will not. They are discussed more often on shorter timeframes and inside narrow ranges, where the distance price must travel to cross a level is small relative to ordinary movement. Widening the threshold reduces how often a crossing happens at all, which changes when a rule fires rather than making the movement any more predictable.