Round trip definition
Round trip
A round trip in trading refers to the dubious buying and selling of the same amount of a security to inflate the perceived trading volume and liquidity of that security. In forex, round trips involve opening and closing a position within a single day, often multiple times, and can interfere with technical analysis.
Round trip trading in other markets such as stocks or on business balance sheets has been the root of many financial scandals. This behavior is considered unethical and can be illegal when used to manipulate a market into appearing more in-demand than it actually is.
Round trip trading rules
At face value, round-trip trading may look like day trading, so rules have been put in place to differentiate the two. If you complete more than three round trips within a five-day period, your account will be flagged as a pattern day trader and your trading account may be locked.
If you are looking to day trade and want to avoid this lock, you must keep at least $25,000 equity in your account and report your net gains and losses as income rather than investments and expenses.