Wash Trading

DEFINITION of 'Wash Trading'

The process of buying shares of a company through one broker while selling shares through a different broker. Wash trading can also make a stock's volume appear to have a lot of activity resulting from the repeated buying and selling done by an individual or firm when, in fact, the shares have never changed owners.

BREAKING DOWN 'Wash Trading'

Wash trading is illegal, as it is done in order to manipulate the market and prompt other investors into buying the position. A quick turnaround in positions isn't considered wash trading, as long as the transaction creates market risk for the trader and changes their market position, even if only temporarily.



RELATED TERMS
  1. Painting The Tape

    A form of market manipulation whereby market players attempt ...
  2. Bucket Shop

    1. A fraudulent brokerage firm that uses aggressive telephone ...
  3. Fighting The Tape

    The action of placing a trade or trades that go against the ticker ...
  4. Volume

    The number of shares or contracts traded in a security or an ...
  5. Manipulation

    The act of artificially inflating or deflating the price of a ...
  6. One To Many

    A trading platform where all buyers and sellers transact with ...
Related Articles
  1. Active Trading Fundamentals

    The Short And Distort: Stock Manipulation In A Bear Market

    High-quality stock reports needn't be confused with stock manipulators' dramatic claims.
  2. Personal Finance

    What it Takes to Get a Green Card

    Grounds for getting a green card include having family members in the U.S., being a certain type of refugee or specialized worker, or winning a lottery.
  3. Fundamental Analysis

    5 Predictions for the Chinese Stock Market in 2016

    Find out why market analysts are making these five ominous predictions about the Chinese stock market in 2016, and how it may impact the entire world.
  4. Career Education & Resources

    Laws & Regulations To Know Before Changing the Name of Your Business

    Discover some of the most important steps you need to take after making a decision to change your legally established business name.
  5. Personal Finance

    Passport Procrastinators: This Year, Renew Early!

    Millions of passports issued nearly 10 years ago when the Western Hemisphere Travel Initiative became law are expiring. Expect backlogs; leave extra time.
  6. Economics

    How Interest Rates Affect The U.S. Markets

    When indicators rise more than 3% a year, the Fed raises the federal funds rate to keep inflation under control.
  7. Investing Basics

    Financial Markets: Capital vs. Money Markets

    Financial instruments with high liquidity and short maturities trade in money markets. Long-term assets trade in the capital markets.
  8. Economics

    The Ripple Effect: Interest Rates and the Stock Market

    Investors should observe the Federal Reserve’s funds rate, which is the cost banks pay to borrow from Federal Reserve banks.
  9. Term

    Understanding Rule 144A

    Rule 144A is an SEC rule that changes the two-year holding period requirement on privately placed securities.
  10. Investing Basics

    Calculating Floating Stock

    Floating stock is the number of shares a company has available for trade in the open market.
RELATED FAQS
  1. Is there a situation in which wash trading is legal?

    Wash trading, the intentional practice of manipulating a stock's activity level to deceive other investors, is not a legal ... Read Full Answer >>
  2. What is the difference between wash trading and insider trading?

    Wash trading is an illegal trading activity that artificially pumps up trading volume in a stock without the stock ever changing ... Read Full Answer >>
  3. Do traders, market makers, specialists or others ever deliberately drive a stock's ...

    Many individual investors have had the experience of closing their position in a stock only to see the price rebound moments ... Read Full Answer >>
  4. What is the Writ of Mandamus?

    A writ of mandamus is a court order issued by a judge at a petitioner’s request compelling someone to execute a duty he is ... Read Full Answer >>
  5. Are UTMA accounts escheatable?

    Like most financial assets held by institutions such as banks and investment firms, UTMA accounts can be escheated by state ... Read Full Answer >>
  6. Can the IRS audit you after a refund?

    The U.S. Internal Revenue Service (IRS) can audit tax returns even after it has issued a tax refund to a taxpayer. According ... Read Full Answer >>
Hot Definitions
  1. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
  2. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
  3. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  4. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
  5. Quarterly Earnings Report

    A quarterly filing made by public companies to report their performance. Included in earnings reports are items such as net ...
Trading Center