What is the purpose of the dealer's wash trading?
Many people have misunderstandings about the dealer's wash trading behavior.
They believe that the dealer's wash trading is solely for the shares in the hands of retail investors. In fact, the dealer's
wash trading itself is not purely for acquiring retail investors' shares. More often,
it is to reduce selling pressure and operational costs when the market rises, making it
more convenient for subsequent price increases and smooth exits at high levels.
For example,
a group of wealthy individuals come together and spend their days speculating to seek
huge profits. One day, they discover a batch of shares in the market that looks particularly attractive, and they all agree
to speculate on this batch of shares.
After market research, they find that there are a total of 10 million of these shares, selling at around 10
yuan each. These wealthy individuals start buying shares, collecting 500 million at 10 yuan each,
which forms their base position.
Now, they raise the price to 20 yuan for sale. There are still 5 million shares in the market,
it is obviously not cost-effective. They want to buy more shares but are unwilling to pay a high price; now their 5 million shares
can already control the price.
