I have to agree with SethArb. I have a ticker of open positions and it just drives me crazy when some jackoff does that. My ticker just spins wild while that is going on and renders that tool useless for me to manage other trades I have working. And While we are on the subject, those little parasites that peg your bid or offer automatically by a tenth of a cent on ECNs. Especially INCA on OTC stocks. Come on girls, can't we all just get along.
My guess as well would be that it is automated. A lot of traders are automated their quotes based on depth of book, the futures, all sorts of stuff. Back in the day it used to be funny when every now and then you would find a progam or some preset alogrithm that was trading a stock when prehaps the market maker was at lunch or busy. I remember a friend of my spending a week or two with one of the market makers that was an ax in NWAC which usally had a decent spread for a 30or so dollar stock. They had a specific alogrithm they used when they were just autotrading it. I don't remember exactly how it worked but it was insanely simple. I remember the spread was wide and if you went inside bid, it would bid one penny a head of you, if you went high bid again, same thing. It would chase the higher bids up 5 cents if the spread was wide enough (it almost always was) before standing pat and sometimes the spread would be 10-12 cents. So you could game it by bidding 4 cents above the market makers bid, then the MM would go 1 cent above that, you then pull your bid, slam his, and rebid the stock where it orginally was bid in the first place along with the market maker (cause if you went high bid again...the leapfroging would start all over again). Today though with all the zillion different order types and games being played it would be hard to exploit any level II edge. The last firm that was able to do that was heartland and you have to wonder if everyone knew exactly what the watcher software allowed traders to do if the market makers wouldn't have clamped down on that sooner. The bottom line IMO is the level II will just screw with your mind if your not careful. I agree with others, basically the only time to really look at it these days is to see where best to route your order at that particular instant. Other than that is a mainly a distraction atleast for me.
it's just games and fakes. i know guys who if they're long start posting up crazy amounts on the bid to show strenght, or they'll post on the offer, then pull it to make it look like some has hit the offer and is going up. it's a lot of noise and crap that you have to ignore.....