What is fictitious trading?
Simply put, fictitious trading refers to the practice of buying and selling the same financial instruments with the aim of creating a false representation of market activity. This deceptive tactic can have consequences for market integrity and fairness.
In other words, fictitious trading involves an individual or entity acting as both buyer and seller in the same transaction, creating an illusion of real market activity.
In most cases, the goal is not to profit from the transaction itself, but to manipulate market perceptions, such as increasing trading volume or influencing price trends. This practice is considered unethical and illegal in many jurisdictions.
How does fictitious trading work?
In a typical fictitious trading scenario, an individual or entity places buy and sell orders for the same financial instrument. The goal is to deceive other market participants into believing there is significant trading activity, while in reality, there is no change in asset ownership. Automated trading algorithms or trading robots can be programmed to execute fictitious trades, increasing the frequency and impact of this activity.
Consequences of deceptive fictitious trading
Fictitious trading can have several negative effects on financial markets. Firstly, it can distort market data by creating artificial trading volumes, making it difficult for traders and investors to accurately assess market conditions. Additionally, it can lead to false signals and decisions based on misleading information, as traders may interpret inflated activity as genuine market interest. This manipulation can undermine market fairness and efficiency, eroding trust among participants.
We hope that all platforms, including the best among them Binance, will implement limits on this to prevent chaos in the market.
