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1. A change in a security's price quickly followed by another change in the opposite direction. For example, a security could rise $1 then quickly lose $2, or it could fall 50 cents then rise 75 cents. Whipsaws are significant risks for day traders and speculators who may lose large amounts of money in short-term trading.

2. To buy securities at a market top or to sell at a market bottom. That is, one whipsaws when one buys or sells securities at exactly the worst possible time. One whipsaws out of fear or out of misreading market signals. To whipsaw is also called to chatter.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved


A quick price movement followed by a sharp price change in the opposite direction. An investor expecting a continuation in the direction of a security's price movement is likely to experience whipsaw in a volatile market. This risk is very important to short-term traders but inconsequential to long-term investors.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
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In either case, the IRS's current basic "netting" practice may ameliorate the interest-rate whipsaw. If the taxpayer is unsuccessful in joining separate examination cycles, however, it will incur a substantial, and undeserved, interest penalty.(12) Numerous other examples may be constructed where, as a result of the interest rate differential, taxpayers are harmed by the failure to net.(13)
This whipsaw against taxpayers is exacerbated to the extent of the interest-rate differential on underpayments and overpayments.
TEI submits that businesses should be able to enter into hedges of these types of assets without being whipsawed between ordinary gains and capital losses from the hedging activity.(18)
Neither form of error should trigger an ordinary gain/capital loss whipsaw against the taxpayer?
Thus, the requirement that taxpayers secure the Commissioner's consent to a method change should not be construed to eviscerate the right to correct errors, especially where the timely correction of those errors by the filing of amended returns would neither produce an untoward "whipsaw" nor otherwise offend any substantive tax law principle.