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Stock Churning

STOCK CHURNING IS THE excessive trading of securities in a brokerage account. Also called burning and churning and over-trading, churning is done in order to increase the broker's commissions, which are directly related to the volume of trading rather than customer profits. Part, or sometimes all, of the client's potential profit may be absorbed by the broker's commission on some trades even though there would otherwise seem to be a profit. Sometimes, the commission will result in the client actually taking a loss on what would have been a profitable trade. In these cases, the broker makes a profit but the client would have been better off with an unchanged portfolio. Although some changes are necessary or good business for the client, excessive trading or ...

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