This post has been selected as an answer to the original posters question
people often put orders in the book that they don't intend to get filled on. Exactly like bluffing in poker. Or double bluffing, etc...
over the past few days I have put up a few videos showing one of my approaches to trading by reading the tape/orderbook, the links are in the "tape is my shape" thread. I just posted them. Orders pulling/reloading are one of the basic stages of orderbook/tape reading.
The following user says Thank You to cpi65 for this post:
"Tape is my Shape" - I will definitely take a look.
,... I can see the bogus orders come through - however - I am watching the affect on depth (tier size) as orders are matched - and I don't see depth decline to a level that would qualify a transition to a different tier based on order flow - that is what is bothering me.
It could be my code - I will scrutinize and see if I am doing something wrong.
Well, I spent most of the day watching Book for the ES.
I was looking for the reason that caused ask/bid to up/down tick and I what I saw was not what I suspected.
Many up/down ticks were precluded by large block trades.
The balance of up/down ticks occurred with trades of small volume even though depth could be quite significant.
With a few exceptions, the large block trades did not cause an immediate change to ask/bid rather the change was delayed (in some cases by up to 50 or more additional trades)
Change in last trade price (up/down tick) usually precluded an up/down tick change to ask/bid
It appears that change in ask/bid price had less to do with inventory being used up (based on order flow) and more to do with changes resulting from orders being pulled or reallocated.
About half the time, when the buys exceeded sells (by 60% or greater) the market would tick down, - half the time it would up tick (and vice versa) (I need to better measure to be sure) in other words, a large imbalance in Ask/Bid was not sufficient to predict a movement.
Finally I could be myopic and what I saw just wasnt so