How to avoid whipsaw

Discussion in 'Technical Analysis' started by ozzie123, Oct 19, 2006.

  1. ozzie123



    I'm new to technical analysis (while previously depends heavily on fundamentals). I'm currently using MA, Stochastic, and MACD as my trading indicator.

    However lately, I got a lot of whipsaw from my traded equity (I exclusively trade stock, not futures nor forex). Does anyone knows (and willing to share) how to avoid this?

    FYI, I'm using 5-20-50 EMAs (with triple cross-over method), MACD (12,26,9), RSI 14, and Full stochastic (14,3).

    All help will be very much appreciated, thanks!

    PS: I'm usually swing trading, holding the stock between 2 weeks - 1 month
  2. switch to day trading

    and don't worry about whipsaw in day trading

    simply enter trade, place trailing stop and check back at closing

    don't even look at it, I am serious don't even look at it

    but of course you need to have a system
    these indicators you mentioned are average and not very good

    try combination of indicators like pivots ETC

    oh and ozzy, get 500 bucks tech analysis software, that goes without saying
  3. whipsaws come with the game. Learn to live with them. If your using a trend following system dont trade it during choppy markets. Easier said than done but ull need to do some research on how to detect choppy from trend.
  4. mtwokay



    For now use an ADX indicator and stay out if it's below 17. Over time you'll just know when to stay out based on price action.
  5. The best ways to avoid whipsaws is to stop trading:)
  6. ozzie123


    @Freelunch: I thought you'll never use the stock again :D. Anyway regarding your posts, yes I already have a $500 technical software (metastock -- particularly like how I can program my own indicators).

    Care to share what system are you talking about here? I know that those indicators are for beginners (hey, I am beginners on technical trading :p). I'm trying to dig deeper on price channels, MA envelopes, and pivots in the mean time

    @aus_SPIder: Care to share how to detect choppy trends?

    @mtwokay: Thanks for the advice, I'll look into it ;)

    @trend_guy: no that's not an option for me :)
  7. Then get use to them, they are part of the game
  8. ozzie123


    I'm aware of that and that's why I'm looking a way to avoid it or at least minimized it.
  9. whipsaw is horizontal trend......trend is friend
  10. Best way to minimize them...

    learn to avoid that first eighth... as Livermore said, it's one of the most costly eighths in trading.
    #10     Oct 20, 2006