Wash cycle trading.

[Leekbrookgull]

Just been a short report on News24 re Wash cycle trading,the presenter tried to explain what it is/was yet the co--presenter still did not understand the process or meaning and nor do i. So could one of NSC's 'City type,s' please explain it ? Thank-you.

 

[pseudonym]

Just been a short report on News24 re Wash cycle trading,the presenter tried to explain what it is/was yet the co--presenter still did not understand the process or meaning and nor do i. So could one of NSC's 'City type,s' please explain it ? Thank-you.

An illegal stock trading practice where an investor simultaneously buys and sells shares in a company through two different brokers

 

[beorhthelm]

An illegal stock trading practice where an investor simultaneously buys and sells shares in a company through two different brokers

but can you explain it without the use of a google search? i cant really see the point other than increasing trade volumes (the point of that is?), and im sure it would cost a fair bit with a paper trail left behind.

 

[pseudonym]

but can you explain it without the use of a google search? i cant really see the point other than increasing trade volumes (the point of that is?), and im sure it would cost a fair bit with a paper trail left behind.

If you create the appearance of increased volume and volatility in a stock traders can make quick gains, its as simple as that.

 

[narly101]

which is why the general public should awlays stear clear of Equity products of any sort. Like gambling, the only winners are the bookmakers. In Equity trading, the only winners are the banks.

 

[Vegas Seagull]

If you create the appearance of increased volume and volatility in a stock traders can make quick gains, its as simple as that.

You don't say how though...
This practice works in smaller cap shares (larger ones too much turnover) where there is an dependence on irregular but vital trading updates. Often prior to these announcements 'news' leaks out & turnover & share price goes up (or down) the day or two before and when you look back you can see that some 'knew'...Companies such as those eith a sole drug awaiting trial news or a single well oil company that may be days away from spudding mud or oil are vulnerable to these 'rampers' who will trade/buy & talk up on message boards, then watch others follow them in forcincing the price up further then EXIT with a profit before news announced so whether it's good or bad is irrelevant, job done

 

[Leekbrookgull]

An illegal stock trading practice where an investor simultaneously buys and sells shares in a company through two different brokers

Hang-on there, so i buy £10,000 of £1 shares Boots Plc on Monday morning at 9am through Broker 'A' then at 3pm seel the lot through Broker 'B' i can understand,but it seems abit like a football club saying our gates are 6,000 when in reality they are only 4,500 may look good on paper,but it won't take long to find out ?

 

[Gangsta]

which is why the general public should awlays stear clear of Equity products of any sort. Like gambling, the only winners are the bookmakers. In Equity trading, the only winners are the banks.

This statement is idiotic. The truth is that the only way of beating the banks is by investing in equities or via equity funds. It is not gambling if you get proper advice and have a clear plan.

 

[narly101]

Hang-on there, so i buy £10,000 of £1 shares Boots Plc on Monday morning at 9am through Broker 'A' then at 3pm seel the lot through Broker 'B' i can understand,but it seems abit like a football club saying our gates are 6,000 when in reality they are only 4,500 may look good on paper,but it won't take long to find out ?

ah but with every bank doing it - no one finds out. it explains a lot about how share prices fluctuate up and down daily when in reality they should remain on an even upward slope (in most cases). banks have been using news stories to artificially inflate/deflate stock prices for years - banks can make a fortune guessing the right way on a stock price, but imagine if they had the ability to move it in the direction they wanted, oh........wait.......they can. It's one of the very reasons that Banks are now closing their cash equity businesses and moving into equity derivatives - there is simply no real way of making money on stocks anymore unless you're in it for the long term.

 

[readingstockport]

I read somewhere recently that the average length for an equity to be held in the US is now 8 seconds, due to automated trading on the basis of minute margins. But if your margin on a trade is 0.1% and you are trading £100,000,000 then you still are making an appreciable profit on the trade overall.

 

[narly101]

This statement is idiotic. The truth is that the only way of beating the banks is by investing in equities or via equity funds. It is not gambling if you get proper advice and have a clear plan.

<sigh> "idiotic" - why do people insist on insulting a quote they disagree with? Your suggesstion assumes a long term plan in Equity products, which is no different than placing money in an ISA. Short term gains on Equity products for the general public is almost impossible, and bears no resemblance to the true market value of the products due to the inability of a member of the Public to do T1 trading. Anyone who thinks they can compete with the banks using general knowledge of the businesses they invest in are blissfully unaware of the impact that banks/brokers/hedge funds/equity trusts can make on the short term market simply by buying and selling with different brokers.

 

[beorhthelm]

<sigh> "idiotic" - why do people insist on insulting a quote they disagree with? Your suggesstion assumes a long term plan in Equity products,...

and your statement said "stear clear of Equity products of any sort", which includes long term holding, and is idiotic as equities perform well over the long term. maybe you should have said what you mean: "the public should steer clear of short term equity trading...". Which for the most part they do.

 

[The Maharajah of Sydney]

ah but with every bank doing it - no one finds out. it explains a lot about how share prices fluctuate up and down daily when in reality they should remain on an even upward slope (in most cases). banks have been using news stories to artificially inflate/deflate stock prices for years - banks can make a fortune guessing the right way on a stock price, but imagine if they had the ability to move it in the direction they wanted, oh........wait.......they can. It's one of the very reasons that Banks are now closing their cash equity businesses and moving into equity derivatives - there is simply no real way of making money on stocks anymore unless you're in it for the long term.

Your paranoia knows no bounds !
Unless there's an underlying intrisic fundamental reason behind such a move you'll more often than not you'll end up holding excess chunks of stock with not enough mugs to sell them onto .

 

[The Maharajah of Sydney]

I read somewhere recently that the average length for an equity to be held in the US is now 8 seconds, due to automated trading on the basis of minute margins. But if your margin on a trade is 0.1% and you are trading £100,000,000 then you still are making an appreciable profit on the trade overall.

The HFT( High Frequency Trading ) Algorithmic Bots are faster than that - much , much faster . They can interparate newly released data & trade accordigly in speeds of 1 / 600,000 sec . They also front-run orders , which Exchanges in a desperate grab for marketshare are obligingly turning a blind eye .
I've traded Stock Index Derivatives & Interest Rate Futures for over 25 years now , holding positions over a very short timeframe of generally between 5 secs & 2 mins . Can't compete with these machines now , so now have switched to trading other markets - currencies & commodities , overwhat for me is a much longer period - typically between 6 hours & 3 days .

 

[Leekbrookgull]

I read somewhere recently that the average length for an equity to be held in the US is now 8 seconds, due to automated trading on the basis of minute margins. But if your margin on a trade is 0.1% and you are trading £100,000,000 then you still are making an appreciable profit on the trade overall.

and would 0.1% be an accecptable as a margin ?

 

[narly101]

and your statement said "stear clear of Equity products of any sort", which includes long term holding, and is idiotic as equities perform well over the long term. maybe you should have said what you mean: "the public should steer clear of short term equity trading...". Which for the most part they do.

a fair point - so apologies.

TMoS puts it succintly with the advent of HFT, and possibly why the Wash Cycle Trade is becoming more prevalent. The larger banks are now buying up real estate closest to the exchanges so they can minimise the latency of the information travelling from them. As a member of the public, there is really no way of making any money on short term equities, because the financial houses beat them all to it.

If you want to make short term gains yourself then you can't go wrong with commodities at the moment.

 

[Leekbrookgull]

a fair point - so apologies.

TMoS puts it succintly with the advent of HFT, and possibly why the Wash Cycle Trade is becoming more prevalent. The larger banks are now buying up real estate closest to the exchanges so they can minimise the latency of the information travelling from them. As a member of the public, there is really no way of making any money on short term equities, because the financial houses beat them all to it.

If you want to make short term gains yourself then you can't go wrong with commodities at the moment.

So what is the difference from insider trading ? Your post seems to suggest it's much the same as Ins/Trading ?

 

[narly101]

I'm no expert on Wash Trading, but Investopedia has a link here; Wash Trading Definition | Investopedia


And this explains perfectly the artificially inflated prices on the stock markets

AdviceTrade Market Analysis | Wash, Rinse and Repeat Up-Cycle

It always irritates me when I see large news stories on the incredible rise of the FTSE, when the UK is clearly close to recession. Where are these inflated prices coming from?!?!

 

[Leekbrookgull]

I'm no expert on Wash Trading, but Investopedia has a link here; Wash Trading Definition | Investopedia


And this explains perfectly the artificially inflated prices on the stock markets

AdviceTrade Market Analysis | Wash, Rinse and Repeat Up-Cycle

It always irritates me when I see large news stories on the incredible rise of the FTSE, when the UK is clearly close to recession. Where are these inflated prices coming from?!?!

Private member's club 'we keep the profit's you take the hit' ?

 

[beorhthelm]

It always irritates me when I see large news stories on the incredible rise of the FTSE, when the UK is clearly close to recession. Where are these inflated prices coming from?!?!

that is because a) the markets price in the future, not the present and b) the FTSE is weighted heavily towards international companies with international outlook, not UK focus.