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CL Spoofing?
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CL Spoofing?

  #1 (permalink)
Trading Apprentice
Shreveport+Louisiana/United States of America
 
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CL Spoofing?

I day trade/scalp CL. Really new at it, been trading the CL for 4 months. I use NT7 DOM and charts. Noted that around stall points and turn points, support/resistance levels, big round numbers, pivots that usually a big level of orders will appear on one side or the other and seems to drag price in that direction. Of course the orders usually disappear without filling. Often seems to cause stop runs.

Not sure if it's the Pit or machine traders, or both? I've read a bit on spoofing, but most of those articles talk about suckering retail traders into a position then immediately fleecing them. This seems to be a way to get price moving past a stall point and the order levels are usually in the opposite direction. So a big ask level above resistance seems to drag price up, big bid drags it down. Whoever it is it doesn't always work out for them, of course.

Any thoughts on it? Is it spoofing and is spoofing this prevalent? Since CL is relatively illiquid compared to ES is it more susceptable to spoofing? Thanks

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  #3 (permalink)
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there is some information on "iceberg" and "growler" orders here that might be helpful. I recommend listening to the whole webinar if you have time:

Webinar: John Hoagland - Order Flow / Tape Reading - "The New Pit"

"I have two basic rules about winning in trading as well as in life: (1) If you don't bet you can't win. (2) if you lose all your chips, you can't bet."
--- Larry Hite from Market Wizards by Jack D. Schwager
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  #4 (permalink)
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Answer
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Spoofing is common in all markets.

A lot of people on forums say "markets always move towards size" but realistically, if they always did that, I'd be the richest man on the planet.

If you go here - Order Flow - Now that you can read it and scroll down to the bottom, there's a video by Kam of L2ST.

He discusses the CL and exceptional size on the DOM and how to go about tackling those area.

Remember that spoofing a thin market is very dangerous, because there's so few contracts in front of you, you are in real danger of getting a fill. So don't presume it's always fake.

The other thing to tip you off with potentiall spoof orders is that if someone is trying to scare people into selling with a large offer, they will also often be buying from those sellers on the other side with an iceberg order.

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Trading Apprentice
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Excellent. Thanks for the insight. I never thought about spoofing being dangerous. The orders seems to usually disappear before getting filled which is why I thought they were some kind of spoof.

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  #6 (permalink)
Market Wizard
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Sure - they get pulled. Normally they spoof 3-4 levels out on thinner markets but they do get whacked now & again.

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spoof-o-matic

There are 2 specific DOM spoofing patterns that I see regularly on the CL tape.

One of which I saw and trade earlier today. Since it's fresh in my mind at the moment I thought I would share my experience. Price was temporarily "stuck" in a tight range with very light volume, the spoof algo appeared in the DOM 4 ticks above the market on the offer side (at .63 if memory serves). Price traded up to the price and backed away a couple times forming about a 5-6 tick range. Then a strong impulse buying wave came in with volume, easily seen using CD, the spoof algo pulled the large offer and the market immediately surged at least 30 ticks straight up on strong volume. I see this specific pattern repeat almost every day. IMHO, what I think this algo does is suppress price into refreshing bids (in this case), then releases the offer and hits the bid hard, I think its an algo of refreshing light bids and a fake large offer followed by a very strong bid, again just MHO only based on a lot of screen time, and some good volume indicators.

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  #8 (permalink)
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trendwaves View Post
There are 2 specific DOM spoofing patterns that I see regularly on the CL tape.

One of which I saw and trade earlier today. Since it's fresh in my mind at the moment I thought I would share my experience. Price was temporarily "stuck" in a tight range with very light volume, the spoof algo appeared in the DOM 4 ticks above the market on the offer side (at .63 if memory serves). Price traded up to the price and backed away a couple times forming about a 5-6 tick range. Then a strong impulse buying wave came in with volume, easily seen using CD, the spoof algo pulled the large offer and the market immediately surged at least 30 ticks straight up on strong volume. I see this specific pattern repeat almost every day. IMHO, what I think this algo does is suppress price into refreshing bids (in this case), then releases the offer and hits the bid hard, I think its an algo of refreshing light bids and a fake large offer followed by a very strong bid, again just MHO only based on a lot of screen time, and some good volume indicators.

Next time you see this - take a look at what is happening on the other side.

On thicker markets you will see the large order on one side but an iceberg on the other. The large offer is to scare people into selling and the iceberg is to absorb that selling. Not to say this occurs in all cases and often it doesn't scare people into doing anything but it's worth looking out for.

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  #9 (permalink)
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Answer
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Spoof algos are becoming more popular among the renaissance of algo trading, particularly in the Forex market where decimal liquidity allows more room for order flow.

Hence why scalping the ES has become increasingly more prone to manipulation around S&R.

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