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 behaviour 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 is similar to 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 you may be required by your country’s regulatory authority to meet the higher standards required of day traders.

If you are looking to day trade and want to avoid having your account locked after making consecutive round-trip trades, check your country’s regulatory organisation for a minimum equity requirement and how to properly report net gains and losses, as it may differ from traditional trading.

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