An investor in the carry trade would borrow short term at lower interest rates from a different country with a different currency, such as the Japanese Yen, and invest in higher yielding assets, such as American Stocks.

Be careful, if the currency goes against you, meaning if the interest rate of the borrowed currency goes up, you can run into trouble.

A whipsaw is a term to describe the movement of a security’s price that begins heading in one direction, either up or down, and then abruptly and drastically begins heading in the other direction.

The term comes from the type of saw a lumberjack uses called a whipsaw that is used with a push and pull movement.