“Spoofing cancel” definition
Spoofing cancel, is a high-frequency trading (HFT) strategy that involves placing large, fictitious orders on a market to create the illusion of demand or supply, and then quickly canceling those orders before they are executed. This manipulation can disrupt the market and allow the trader to profit from the confusion it creates.
The process
1. Placing fictitious orders
A trader or entity aggressively places a large volume of buy or sell orders for a financial asset, typically near the current market price. These orders may appear legitimate, but the trader has no intention of actually executing them.
2. Creating the illusion of demand or supply
By placing these orders, the trader creates a false impression of demand or supply in the market. Other market participants may see these massive orders and wrongly conclude that there is strong interest in the asset at that price level.
3. Waiting for others to react
The trader waits for other market participants to react to the fictitious orders by placing their own buy or sell orders, typically in the direction the trader desires.
4. Quickly Canceling Orders
Once other traders have reacted and the market has moved in the desired direction, the trader behind the spoofing and canceling quickly cancels their initial orders, removing the false impression of demand or supply they had created.
5. Profiting from price movements
The trader can then profit from the resulting price movements, as other market participants have been deceived by the fictitious orders and have taken positions based on this false information.
