Ok regardless of spoofing The DOM...iceberg hidden orders..etc..in the end doesn’t the little chart in front of my eyeballs tell the truth? And show the footprints? Or is it being spoofed too?
As a speculator yourself it’s a given that the counter-party trade activities that matter to you the most - the large spec accounts and Commercials are using very sophisticated software in order to execute large positions with the smallest most inconspicuous footprint possible. Some of these execution tools use AI to break up and inject orders in very ingenious and stealthy schemes.
We also know that there exists a population of speculators whose sole strategy is to prey on other other speculators exclusively by manufacturing deception - they game the order book through crossing trades, quote stuffing, stacking, flipping, and spoofing The purpose of which is to create a false illusion of market activity whose goal is to compel other naive traders into executing trades into a bias narrative that enriches them. And most of the spoofers use automation.
So why would you trust the micro architecture of the market? And are these “footprint” tools capable of segregating garbage from useful legitimate trade volume ? (the answer is “No” / they don’t have access to individual trade identifier tags).
The reason that Market Profile has held up so well over time is that it incorporates a “time at traded price” and a very novel “Control Area” concept with some clever rules. It’s essentially a vertical histogram with a rules set. As I learned from Pete Steidelmeyer - price changes over time, and the market’s acceptance or rejection of a particular price is very useful information for a speculator.
I started trading in the pit, and I quickly learned NOT to fade size.
And I was an early trader in Project A and Globex - and you’re right about electronic markets attracting nefarious gamesmanship.
To me, price sensitivity is much more important than what volume changes hands at a given price. And spoofers themselves are price sensitive to extremes - you can really tell by the way they stack an order book to favor a particular bias and to induce trading into the bias that enriches them. I can’t tell you how thousands of times I’ve seen orders stack up in a DOM - and then cancel when a better price trades. If they truly wanted to get filled they’d leave the orders there.
To radically simplify it (too obvious these days, btw) - these guys will stack the offer side of the DOM with four 1,000 lots a couple tics or so away from the best offer - bid for fifty, then sell twenty-five to themselves (cross) - just to get small specs to puke into them. Even for good measure they might have parked three or four bids below best bid and cancelled those in order to induce small spec panic selling into their illusory fleeting bid. And they will do that shit hundreds or maybe thousands of times a day. These spoofing Algos will even sense other spoofing Algos and amplify the order book imbalance. They are an invasive species. They are not legitimate liquidity providers in that they inject thousands of orders into an exchange ECN that they cancel without even a partial fill. Their message-to-fill ratios are obscene.
