A. Here’s an easy way to remember what a whipsaw is when it comes to trading. First let’s break down the definition.
"a saw with a narrow blade and a handle at both ends, used typically by two people."
Now if you replace those two people with a buyer on the one side and a seller on the other side holding the whipsaw, it’s easier to picture.
Trading a whipsaw is when a market moves in a new established direction (e.g. UP) and then suddenly reverses (WHIPSAWS) shortly after (e.g. DOWN).
If the market forms a new uptrend, we say there is more demand as the buyers are in control. Shortly after this uptrend, the market whipsaws into a sudden downtrend where the sellers then overtake.
The ALSI 40 showed a classical whipsaw this month.
For eight months we saw the ALSI 40 move in a sideways trend. A few weeks ago, the buyers took over, which sent the price breaking above the sideways trend.
After a very short period of time the ALSI then had a whipsaw which resulted in the uptrend reversing back into its sideways range. Take a look at the chart below to see what I mean.
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From a sideways trend to an uptrend back into a sideways trend, this whipsaw trapped many buyers as the market decided to drop once again which resulted in a lot of stop losses being hit.
How long will it take me to be a consistently profitable Red Hot Storm trader?
To be a consistent Red Hot Storm Trader
, when I send out a trade you'll need to make sure you place your entry, stop loss and take profit exactly with the levels I provide you.
Also, you’ll need to follow my strict but essential money management rules, each time. You can find this in the free Secrets of Successful Trading Booklet I sent you when you joined Red Hot Storm Trader.
You need to remember, I’m using a 16 year proven and traded break-out low risk trading strategy with very specific parameters and criteria.
The other way to be consistent as a Red Hot Storm Trader is by not adding any extra rules, indicators, or strategies when you follow the signals I send out.
If you follow these steps every time, your account will mirror the service's portfolio which will keep you a consistent Red Hot Storm Trader.
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Q. “Timon, I have a high pressured job and I don’t have any time to take a trade during working hours. Will it be too late to take a trade when I get back from work?”
A. Yes, as long as the trade is opened where it has not hit your take profit or your stop loss level, it's still valid to place your trade order.
Unfortunately, anything can happen during the market hours.
Either it can run up above the entry level where you miss out on the trade or it could be under the entry level where you’ll get in at a better price.
If you get home to find that the trade is still open, you can simply log onto your trading platform and place your trade order.
This means you'll place your entry, risk and reward levels and wait for the market to hit your entry and get you in the next day.
“Wisdom yields Wealth”
Head of trading, FSPInvest.co.za