Almost every month, I am writing about big traders at large banks, ripping off small traders through the illegal activity known as ‘quote stuffing’ or ‘spoofing.’
Just a mere two weeks ago, I wrote an article that detailed how Mizuho Bank, Geneva Trading, and Victory Asset had been fined millions of dollars for scamming small investors.
Here we are yet again, Bank of Nova Scotia has agreed to pay an $800,000 penalty for ‘spoofing’ in the precious metals Futures markets.
What is ‘Spoofing?’
If you are unsure what’spoofing’ is, then please browse the following:
Spoofing is incredibly simple. It’s the act of stuffing the order book with buy or sell orders…which you have no intention of actually implementing. Everyone can do it. Let’s take a peek at the most frequent example.
Suppose that you simply enter a long position in the Emini SP500 futures contract at 1300. You want the price to go higher so that you can make a profit. For the vast majority of people, we must sit and expect that extra buyers will push the market higher.
Spoofers do not wait for ‘organic’ or natural buyers to enter the market. Spoofers use sophisticated computer programs that instantaneously enter massive quantities of orders in the area where they want to exit their trade. Not where they want to enter a trade.
The influx of orders is meant to fool small investors into believing that something big is happening. And they should pile into their position, in the direction of the order flow.
However, the spoofed orders are never actually filled. They are canceled just a millisecond before the price touches the order. Small traders, like us, cannot see the manipulation because humans do not have the capacity to digest information and react at the millisecond level.
The end result is that small investors, like us, are spending a great majority of our time ‘chasing our own tails’ while the spoofers are leading us from point A to point B.
Who is enabling the ‘Spoofing’ phenomenon?
There is an entire cottage industry of software providers that are currently pushing ridiculous software that proclaims that “you can predict the future by watching order flow.”
Let’s not forget to also call out NinjaTrader Brokerage and their relentless and outrageous promotion of these fraudsters. I have dedicated hundreds of hours exposing the NinjaTrader Ecosystem and the army of scam artists pushing this crap.
The following short video is an example of a douchebag selling his ‘order flow’ snake oil…
Resting Orders are NOT PREDICTIVE
None of this ‘spoofing’ nonsense would be possible if traders simply ignore resting orders.
Larger banks and institutions are using resting orders and quote stuffing to lure the sheep into the slaughter. Period. End of discussion.
Will they ever stop? Misinformation in markets is as old as markets themselves. Yes, it’s wonderful that the CFTC takes action in an attempt to keep markets functioning properly.
However, the lure of easy money is simply too great for us mere humans. Nearly all of us will lie, cheat, and steal if given the opportunity at a clean escape.
And finally, RESTING ORDERS ARE NOT PREDICTIVE. Anyone with average programming skills can test whether ‘iceberg’ orders or massive order blocks predict where price is heading. On a second to second basis, its just random noise and misinformation meant to lure the weak into the mouths of the strong.
The scammers, hustlers, and snake oil salesman pushing their BS ‘order flow’ trading software would have you believe otherwise. But over the past 5 years of writing this blog, nobody has pestered these scammers more than TradingSchools.club in hopes of obtaining definable code that ‘order flow’ is predictive.
Just the latest fad in ‘technical analysis’
Back in the 1990’s, I got suckered by a conman named George Lane. He was the supposed inventor of a new and revolutionary form of technical analysis. It was called Stochastics!
Everyone and anyone was obsessed with Stochastics. The legend of Stochastics was as great as Santa Claus on Christmas Eve. There were stories of people that made millions overnight, all through the magically predictive Stochastic formulas offered by George Lane.
Well, it took about 15 years before this financial diarrhea worked its way through the public-at-large. In the end, the only people that made money with Stochastics were the scammers, hustlers, and thieves that sold the snake oil. Rest in peace, George. You managed to scam the scammer.
It’s funny how nothing ever really changes. How the circle keeps on repeating with the next generation.
Thanks for reading.