What Is a “Wash Trade” and How Does It Relate to Transaction Costs?

A wash trade is a form of market manipulation where an investor simultaneously buys and sells the same asset to create a misleading impression of trading activity. It generates no real change in ownership.

Wash trading incurs transaction costs (fees) but is sometimes done to generate volume for exchange incentives or to artificially inflate an asset's price. Regulators strictly prohibit it in traditional markets.