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Manipulation in the markets is nothing new in the markets and I wouldn't say that it's specific to any visual representation of the markets be it a DOM or a Chart.
Certainly HFT didn't see the introduction of manipulation to the markets but quote stuffing/latency arbitrage is new, not that you could really ever see it in time to react.
The first place to look for manipulation is in the press. News has been manipulated since the markets came into existence. Look at the Facebook IPO. The way they knew the prospects were nowhere near as good as they really were.
VSA is a methodology that attempts to spot the footprints of manipulation in the markets but how reliable it is, I don't know.
Shorter term manipulation on the DOM does have a certain appearance (e.g. a flip) but here's the rub:
- You only really know it's a flip AFTER the event
- Attempts to flip the market often fail
- just normal market action can give the appearance of a flip - stat arb trades executing for instance
So - whilst you can see a lot of this stuff, it doesn't mean that a "follow manipulation" strategy is going to be successful. Not all attempts at manipulation succeed.
Personally, I'd say being able to spot attempts at short term market manipulation for me accounts for perhaps 10% of what I do as a hard core DOM reader. It is more refinement than a system within itself. For example, if you are long ES and suddenly 9000 bids appear the 3 levels beneath you - well - you probably need to look @ bailing out - but context is king - if you are 3 points in profit on a trade, that manipulation may mean a 4 tick pullback and essentially be meaningless in the context of the current trade. Then again, if those 9k bids are just as you approach the high of the day, then you could be looking at a major reversal.
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