I have noticed this pattern on the DOM while sim trading NG. There will be large orders (120-300 contracts) that pop up at certain prices. It seems more often than not that price goes through the level with a large amount of orders instead of away from it. For example, this morning there were 350 contracts for sell at a particular price. When the price hit this level, the orders were not pulled. Market orders were flashing on the time and sales of 30+ (way more than the average order size on the time and sales) contracts wiping out the seller stacked at this level. Is this a known pattern?
It seems like it is best to buy when you see an unusually large number of sellers, and sell when you see an unusually large number of buyers.
I trade CL and notice this frequently as well. Although I don't use it as an entry signal, if I'm already positioned and there's a price level with this large size showing, I often hold the position until the level is tested because I noticed that either it's real, gets eaten up and price blows through it, or it's a spoof, disappears at the last second and price blows through it. Only on the rarest occasions (usually at a big round number) does large size getting chewed through actually contain price.
I'd love to know what the intended effect of these large orders is because they almost never act as a barrier to further price movement, even if that further movement is only 10-15 ticks.
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What I have noticed on crude as well is that these huge orders act like magnets. No matter if they stop the price or not, price will often blow thru them and retreat, some times for good and some times temporarily before continuing.
I just replied to another similar thread as to the mechanics of this. The orders on the books aren't actually getting wiped out, the quotes are just shifting faster than your retail broker can provide you quotes. HTH.
If there are a lot of large orders stacked up on the offer, for example, I am very confident that at some time during the day price will rise and go get those orders. It's usually not a question of "if" but "when". So much so that I have incorporated it into my trading method as bias or to stay in a trade.
These orders are definitely being filled and not pulled. If you watch T&S or Cumulative Delta it is clear that a large number of orders are hitting the offer as price moves up through these levels. Same is true of the bid on the downside.
Spoofers are easy to spot. They don't sit on levels for long periods of time and pull when price gets within 2 ticks. Spoofers are usually behind price movement, not in front of price movement.
I have yet to hear a good explanation for the phenomenon. My theory is that the market makers have a job to do, and when big players want their orders filled the market makers will strategically push price around to eventually get the job done. Once the large orders are completed, price might reverse (if the big players have initiated new positions) or just languish around (if the big players have exited their positions).
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If you could trade size what would you do?
Sliding in.....hitting out.
Discretion would be wise on entry.
If you are controlling the micro move then it'll go where you want it to.
This behavior is classic MKT to LMT.Basically this is what having control of a market short-term looks like.
Those heavy LMT's will be liquidation on STP's.
Last edited by switchtrading; March 28th, 2014 at 01:31 PM.
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The spoofing occurs to push the price to get it to where the HFT's can enter of exit their genuine strategies, as they are only interested basically shaking the tree to make it look as though the market is moving in one direction and then massively betting in the other and effectively roping in as many small traders to profit against. Then when the price moves in their favour they are out with the pennies and job done.
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