Daisy Chain

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 "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 Answer >>
  2. What is the difference between a value chain and a supply chain?

    Understand the difference between a value chain and a supply chain. Learn why a company would want to maximize the value ... Read Answer >>
  3. Is there a situation in which wash trading is legal?

    Learn about what wash trading is and how it can affect the value of a stock. Explore the difference between wash trading ... Read Answer >>
  4. How can I use value chain analysis to evaluate investment decisions?

    Understand how an investor can use value chain analysis to evaluate an investment decision. Learn what activities add value ... Read Answer >>
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    Learn about trading volume, its importance and how investors analyze volume to confirm a trend or reversal in a security. Read Answer >>
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    Read about the origins of Chris Ferguson's securitization food chain, and find out how mortgage lenders could package and ... Read Answer >>
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