“Spoofing Layering” definition :
Spoofing layering, also known as layering, is a market manipulation strategy where a market participant places a large number of orders on one side of the order book (buy or sell) with the intention of creating an artificial impression of significant demand or supply. The manipulator’s real intention is to execute trades on the opposite side of the order book, meaning they want to buy or sell the asset in the opposite direction.
How Spoofing Layering Works ?
1. Creating the illusion of significiant demand or supply
The manipulator starts by placing a large number of buy or sell orders for the same financial asset on the side of the order book opposite their real intention. For instance, if they want to sell, they will place a multitude of buy orders to create the illusion of strong demand for the asset.
2. Waiting for other traders to react
By placing these orders, the manipulator waits for other traders to react to the apparent significant demand or supply by placing their own orders in the same direction.
3. Executing opposite transactions
Once other traders have reacted and the market has moved in the desired direction, the manipulator executes trades in the direction opposite their initial appearance. For example, if they had created the illusion of strong demand by placing buy orders, they will actually sell the asset.
4. Profiting from price movements
The manipulator can make a profit by selling the asset at a higher price (if they had created fake demand) or buying it at a lower price (if they had created fake supply). Other investors who were deceived by the initial appearance of the order book may suffer losses.
