Why suffer whipsaw trades?

The Problem: a whipsaw trade occurs when prices move just far enough to trigger an entry signal, before immediately reversing to create a loss. In sideways markets, this is often caused by trend-following trading logic with protective stops – trend-following logic producing the entry, and the stop, an exit for a loss.

LEAPFROG’s xT2N indicator takes a low value in sideways markets; with appropriate thresholds, you can disable entry signals in those markets. With thresholds of +/- 0.05, the red arrow shows where entry signals would be disabled and the green where they become re-enabled.

This approach offers greatest value for extended sideways markets, where sequences of whipsaw trades can be ruinous.

Incorporating xT2N, one of many new indicators in LEAPFROG, into a trend-following trading system means damage to P&L from sideways markets can be minimized.

LEAPFROG’s design and editorial policy for indicators is simple: concentrate on quality and trading usefulness, ignoring indicator “quotas” which make searching for useful indicators like looking for a needle in a haystack. We believe in quality, not quantity.

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