A wash trade is a form of market manipulation in which an investor simultaneously sells and buys the same financial instruments to create misleading, artificial activity in the marketplace. First, an investor will place a sell order, then place a buy order to buy from himself, or vice versa. This may be done for a number of reasons: To artificially increase trading volume, giving the impression that the instrument is more in demand than it actually is. After three wash trades in one security you will be restricted from trading the security.