https://en.m.wikipedia.org/wiki/2010_Flash_Crash Uh oh ..looks like it was certainly more than spoofing. The beloved and admired HFT’s may have been involved. Front running may have been involved. Fat finger may have been involved (best take up dieting traders LOL). Currency markets may have been involved. Large directional bets probably made with algos may have been involved. Decentralization of trading may have been involved. Electronic glitches may have been involved. BUT ...they nail a 36 year old spoofer in England and outlaw spoofing and frontrunning..(both of which I suspect still happens). HTF’s still running strong. Most traders fingers have getting fatter as a result of a lack of dieting...large directional bet are still placed...dark pools are still dark...iceberg orders are still hidden...more and more algos are coming onto the scene, probably daily...currency markets are churning...decentralization is still in place..glitches still happen (remembers those forms you sign when opening an account)...on and on ....ad nauseum. Um yep but somebody had to be blamed and get punished. Correct? Yep our regulators have for sure fixed the problems. Ladies and gentlemen it is my pleasure to announce to the trading world that no more flash crashes can happen. The problem has been fixed...trade on....yep.... RIGHT. (Sarcasm) PS..I disagree with spoofing. I think it is wrong and a deceptive practice... but what about the other stuff?
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.
I agree ..I agree..I agree..the games that are played. But don’t you think we as traders can trade outside that danger zone where this crap is mostly taking place by PA reading of charts since they “supposedly” LOL... record “where” actual trades took place and graphically indicate direction? I say “supposedly” because a few years back there was some bantering back and forth on brokerage firms manipulating and filtering data feeds to display differently than what actually happens. I argued against that happening because at the end of the day or 30 minutes or 60 minutes time slice ...your 5 minute chart of the ES is gonna look just like my 5 minute chart of the ES whether over 60 minutes or 30 minutes or all day REGARDLESS of the data feed. Otherwise, we are all royally screwed and could never trade. To prove this to myself I opened charts by two different brokerage firms and watched the same contracts trading and tick for tick they did both moved in unison. Of course, I could have just picked, unknowingly, two honest brokerage firms..to experiment on..ROFLMAO.
But in the end no matter how they disguise their orders as they place them their intentions can’t be hidden in terms of price movement because the chart will tell the truth. If it is going up bullish institutions are buying or selling institutions are backing off on their offers. At any rate the fact the chart is going up makes the footprint bullish..eh?
If by micro structure you mean the DOM. I agree. Today it is extremely difficult to trade in that arena. Too many games played. Some folks have learned how to game the gamers at the DOM LEVEL. But back when stocks traded in fractions I loved it. I could trade with level two and scalp all day long. I hated it when decimals arrived. The nice spread disappeared. I still hate decimals and the entire metric system. Especially, in wrenches and tools and carpentry and block laying...etc. It is a nightmare. Carpenters in Honduras use inches and feet. Masons use centimeters. Gas stations use BOTH gallons and meters. Distances ..miles and kilometers...just ridiculous. They started that crap when I was in 6th grade. I have hated it ever since. Go to work on my car or truck I never know if a bolt is gonna be metric or standard and cannot judge the size by a cursory look at it. But I admit can’t see as good anymore.
And as you’ve suggested a trader certainly doesn’t need a ‘market delta’ or ‘footprint heat map’ or any such superfluously marketed tool for that. When you see a bid trade out, go hard sellers offer - then see the next best bid start to trade you should know what to do in a fraction of a second. Without looking at a heat map or a footprint study for Pete’s Sake. You don’t need a add-on toolbox for that.
b And what would YOU do? Hit the bid? Ride the momentum? How far? Till it stalls? This is your pit experience talking...eh. What about the spoofers?
I have probably given all that I can give to this thread unless some ET’ers with legit professional futures markets DOMs like TT, CTS, CQG IC can join the conversation. Out for now - unless some active futures traders appear who can relate.