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I have algo trading program (written by myself) and when it detects that price are going down it's going to sell shares (if I have one) wait a couple of sec/min and buy the shares on lower price.

Last time I saw on Wikipedia that my strategies in some way describes wash trade, however I'm not trade on huge volume, I'm just detecting price movements and use it as my strategy, but sometimes I'm going to detect price fall before it happen (volume, moment etc - technical analysis) and start selling, so from outside world it may look like I initiate fall in price.

Can authorities claim that it's wash trading and start legal process?

chicks
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Andrew Sasha
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2 Answers2

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This doesn't sound like the kind of wash trading described in the Wikipedia article (market manipulation). There are many medium to high frequency trading strategies like it.

However, your trades will probably be considered wash sales for tax purposes (disallowed losses since held less than 30 days).

You might also be flagged as a pattern day trader, which isn't illegal but comes with additional constraints/rules.

Edit: You linked to an article, regarding illegal market manipulation that doesn't apply to you. It's a wash sale that applies as noted above. No 'legal process' as it's not illegal, it just becomes something that turns into a tax question. Wash sale questions are common here. /JTP

JoeTaxpayer
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0xFEE1DEAD
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From the referenced article which I have no reason to disagree with:

Wash trading is a form of market manipulation in which an entity simultaneously sells and buys the same financial instruments, creating a false impression of market activity without incurring market risk or changing the entity's market position.

  • Are you buying and selling simultaneously?
  • Are you attempting to manipulate the market?
  • Are you incurring risk?

Based on your question I think your answers are 'no', 'no', and 'yes'. If you were engaged in illegal wash-trading, your answers would be 'yes', 'yes', and 'no'.

Seems to me that what you are doing is not only legal but pretty straightforwardly so.

Wash trading is where you sell shares to yourself (or an accomplice) in order to make it look like (typically) that there's some sort of upward market momentum around some asset. It's pretty well known (I think) that this kind of scam represents a large portion of the volume for cryptocurrencies (yes, even Bitcoin) if not most of the volume.

Unless you are fabulously wealthy, talking about shitcoins (sorry, that's the 'official' term), or are trading penny stocks, you aren't moving the market. I think you are OK.

JimmyJames supports Canada
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