What Is a Round Trip Stock Trade?

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Round trip stock trading, which is illegal in the United States, is when an investor buys and sells a stock in the same day. Learn how round trip stock trades inflate the volume of trades for a stock with information from a financial analyst in this free video on the stock market.

Part of the Video Series: Stock Market Tips & Facts
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Video Transcript

Do you frequently buy and sell stock in the same security in any day? Hi, this is Roger Groh with Groh Asset and today we're here to talk about round trip stock trading which is illegal in the United States. If you buy stock in one day and sell it the same day, you may be viewed as doing round trip stock trading. If you do it four times in a week you may be viewed as a stock trader. Example, if you were to buy shares four times in a company and then sell it once during the week, you may be viewed as having done a round trip stock sale. That is not a good thing. How do you get around that? Well, if you have at least twenty five thousand dollars in cash in your account, you're not subject to any of the rules. Other things that might trigger it? Well, if you frequently in any day, buy and sell, and buy and sell and buy and sell, boy, you know those compliance people are going to be all over your case quick. Now, why care? It's because many investors make their legitimate investment decisions based upon the volume in a stock in any day or period. And if the reason that you're buying and selling and buying and selling is not to make money, but to inflate the value, then you are doing something that the securities and exchange commission deems as illegal. So, be careful if you're buying and selling a lot. To get around it keep twenty five thousand in cash. I'm Roger Groh at Groh Asset Management and thank you very much for spending time with me.

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