Spoofing

Trader's Glossary · Order flow

Definition. Placing orders with the intention of cancelling them before execution, to mislead other participants about supply or demand. It's illegal on regulated markets.

How it works

Large orders appear in the book to create the impression of strong demand or supply and disappear as price approaches them. In the US, the 2010 Dodd-Frank Act explicitly banned spoofing, and regulators impose heavy penalties for it.

Example

A very large sell order appears in the book a few levels above price and disappears every time price gets close to it.

What to watch out for

Not every cancelled order is spoofing. Market participants legitimately modify and cancel orders. That's why what actually trades matters more than the picture in the book.

See also

DOM (order book), Iceberg order, Liquidity.

More in Hetman Capital Club

You'll find the full explanation with graphics, examples and exercises in the 🖥️ Order flow atlas space, and its use in the live market in the 🔴 Live Room. Both are available to Club members (in Polish).

Educational content, not investment advice.