Overtrading

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Dictionary Says

Definition of 'Overtrading'

1. Excessive buying and selling of stocks by a broker on an investor's behalf in order to increase the commission the broker collects.

This situation has been known to arise when brokers are pressured to place a newly issued security underwritten by a firm's investment banking arm. 

Also known as "churning".

2. A situation in which a company is growing its sales faster than it can finance them. This usually leads to enormous accounts payable or accounts receivable and a lack of working capital to finance operations.
Investopedia Says

Investopedia explains 'Overtrading'

1. One way to protect yourself from overtrading (churning) is through a wrap account - a type of account that is manged for a flat rate rather than charging commission on every transaction.

2. Many businesses become insolvent because they try to accommodate everyone who wishes to purchase their products. This ultimately leads to not being able to pay for the financing costs used to produce the goods.

Related Definitions

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'Overtrading'

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    Under and overtrading can lessen an investor's profits. Find out how to fix
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  • Tips For Avoiding Excessive Trading

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    ... Excessive trading, or the excessive buying and selling of stocks, may also be referred
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  • Earn More Profit With Less Trading

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    Avoiding overtrading can save your money and your sanity. Find out
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  • 4 Dishonest Broker Tactics And How To Avoid Them

    http://www.investopedia.com/articles/02/120502.asp
    ... This is an account by which a broker manages a portfolio in exchange for a flat
    fee. The advantage of a wrap is that it protects you from overtrading. ...

  • 9 Events That Moved The Markets In October - Investopedia.com

    http://financialedge.investopedia.com/financial-edge/1111/9-Events-That-Moved-The-Markets-In-October.aspx
    ... Violent market swings create a lot of commission for the brokers, but
    overtrading a volatile market rarely leads to impressive gains. ...

  • Is Your Broker Acting In Your Best Interest?

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    ... A good broker will actively manage your account, however, your broker shouldn't
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  • The Rap On Wrap Fees For Retirement Accounts

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    ... May 16 2005 | Filed Under ยป Options, Retirement. Because of their flat fee - which
    eliminates the problem of overtrading by commission-seeking brokers - fee ...

  • What is a wrap account and what are the advantages of using one?

    http://www.investopedia.com/ask/answers/102.asp
    ... of as low as $2,000. Another advantage to a wrap is that it protects investors
    from overtrading, or churning. This is when a broker ...

  • Get Positive Earnings In The Negative-Sum Market

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    ... the financial markets. Make the game as close to zero-sum as possible:
    We can move the game more to zero sum by not overtrading. ...

  • The 10 Commandments Of Investing

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    ... overconfident. Overconfidence often leads to overtrading, taking unnecessary
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