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Disregarding the "Why?" or potential brokerage/trading fees, please consider the following scenario:

I have two positions, A and B. I have $100,000 in position A at the beginning of the month. I sell all of position A at end of week 1. I then use those funds to buy equivalent $ amount in position B at end of week 2. I then sell all of position B at end of week 3. I then use those funds to buy equivalent $ amount in position A at end of week 4. Rinse and repeat for following/new month, and then the next, and etc.

So my question: Should I expect my brokerage to: 1) Actually notice this activity?; and 2) care at all? Nothing nefarious involved, just a "churn" scenario that I am interested in understanding.

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Brokers do not care how often you trade as long as you are either trading with settled cash (cash account). There is no issue with this at all in a margin account.

The only thing that you have to beware of is Wash Sale violations which could possibly present you with tax issues if not properly dealt with by the end of the year.

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So my question: Should I expect my brokerage to: 1) Actually notice this activity?; and 2) care at all? Nothing nefarious involved, just a "churn" scenario that I am interested in understanding.

since this is just a scenario...

I have seen limitations on doing this within 401(k) accounts, they limited the number or type of transactions a person could make each month. They ran into issues as the they went from systems where all changes in the investments had to be in response to paper forms that were processed once a month, to one in which you could do everything on line. Some people were making adjustments every day.

They limited the number of transactions to cut down on the administrative costs. They also used the excuse that these were supposed to be invested in the long term and should not be moved in response to short term news.

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  • I have seen similar agreements within company-sponsored pension plans in Canada, that funds moved multiple times per month would have a 1% admin fee penalty applied. Mar 10 at 15:37
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The brokerage won't care. This is common for tax-loss harvesting where you sell a tax lot at a loss and buy a similar enough investment that the wash sale rule isn't triggered, but it still correlates 99% with the original.

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