What is a Wash?
A wash occurs when two actions cancel each other out (such as a gain and an equal loss), effectively creating a break-even situation.
How Does a Wash Work?
Let's assume XYZ Company sells $1,000 worth of products. If these products cost XYZ Company $1,000 to manufacture, the transaction is considered a wash. Likewise, if an investor makes a $1,000 profit on an investment but loses $1,000 on another investment during the same time, the result is considered a wash.