Daisy Chain

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DEFINITION of 'Daisy Chain'

A group of unscrupulous investors who, practicing a kind of fictitious trading or wash selling, artificially inflate the price of a security so that they sell it at a profit. Price manipulation is typically very difficult in stocks with heavy volumes, so the stocks with low liquidity are much more susceptible to daisy chains.

BREAKING DOWN 'Daisy Chain'

Investors who do not look carefully at a stock are the usual prey of a daisy chain. As a stock rises due to increased volume, investors who didn't do all their homework may be attracted to the stock because they want to participate in the rising price. These investors are typically caught owning a stock that continues to depreciate long after the daisy chain sells out their positions for a profit.

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RELATED FAQS
  1. What is a "wash sale"?

    The Wash-Sale rule was established to disallow a loss deduction of a security sold, if within 30 days of the date of the ... Read Full Answer >>
  2. What is a "daisy chain"?

    A daisy chain is a term used to describe a group of investors who engage in activities that inflate or deflate the price ... Read Full Answer >>
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    Generally, penny stocks are traded through the use of the Over the Counter Bulletin Board (OTCBB) and through pink sheets. ... Read Full Answer >>
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    Some penny stocks, those using the definition of trading for less than $5 per share, are traded on regular exchanges such ... Read Full Answer >>
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    The stock market reacts to changes in the federal funds rate in various ways depending on where it is in the business cycle. ... Read Full Answer >>
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