A real life example is a store where the owners hire fake shoppers to crowd the store and "buy" items that are later returned to the store and refunded. All to make the shop look busy compared to other shops, in order to attract customers and claim that they have more foot traffic than competing stores.
A wash trade is anything that results in the equivalent outcome as earlier. It was used to get fraudulent tax refunds so it's not allowed to be used that way. An example is buying AAPL at $150 in January, and it falls to $100 in December. One could sell the stock to claim the deduction on the tax return for the year, but would miss out on potential gains on the stock. So what people would do is sell the stock on Dec 31st and buy it back on January 2nd in the new year. So IRS made a rule that doing such a thing is a wash trade and not eligible for tax deductions on the booked loss for the year.
A wash trade is anything that results in the equivalent outcome as earlier. It was used to get fraudulent tax refunds so it's not allowed to be used that way. An example is buying AAPL at $150 in January, and it falls to $100 in December. One could sell the stock to claim the deduction on the tax return for the year, but would miss out on potential gains on the stock. So what people would do is sell the stock on Dec 31st and buy it back on January 2nd in the new year. So IRS made a rule that doing such a thing is a wash trade and not eligible for tax deductions on the booked loss for the year.