first of, I think trade is only possible by putting the players on TL. How else can one transfer a player to another team.
second, if you want to trade, you must be sure the price of the transfers is high enough, otherwise an other user might bid on them, disturbing the trade. By doing this, the transferfee you pay will be much more than when you would buy a similar player, for a normal price.
So I'd say yes, trading is alowed, because there is surely no benefit to be made, it will only cost the traders some more. It is, like Juicepats says, just like 2 transfers, anyone can bid...
An other thing, which is not trading, is when you agree with yourself, or a friend to put up a very useless player for much money, and from the other team a very good one, also for a lot of money, and and then exchange. Because both players are so diffrent, and 1 team obviously benefits, this can't be called trading. This was also stated by Juicepats, but not in so many words, hope this makes it a bit more clear to the ones that didn't get it at first.
To conclude, if you want to trade, make sure both players are about equal in skills.
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