Wash Trade

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Definition of 'Wash Trade'

A wash trade is not the same as a wash sale. A wash trade is an illegal form of stock manipulation in which an investor sells and buys shares at the same time in order to artificially increase trading volume and thus the stock price.

The United States Security and Exchange Commission defines a wash trade as "a securities transaction which involves no change in the beneficial ownership of the security."

By artificially inflating the volume figures for a security the trader can dupe other traders into believing that interest has picked up in a security which may lead other traders to start buying or selling the security.

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