Spoofing

What Is Spoofing?

Spoofing is a market manipulation tactic where traders place large buy or sell orders with no intention of executing them. The goal is to create a false sense of market demand or supply, tricking other traders into reacting and moving the market in a desired direction.

How It Works

• A trader places a large buy or sell order far from the current market price.
• The order is designed to create the illusion of high demand (buying) or supply (selling), making other traders believe the price will move in that direction.
• Once the market reacts and the price starts to move, the spoofer cancels their order, taking advantage of the price change to execute trades at a more favorable price.

Example

A trader places a massive sell order for Ethereum just above the current price. Other traders, thinking there’s a large sell-off happening, start selling too, pushing the price down. The spoofer then cancels their sell order and buys Ethereum at the lower price, profiting from the drop.

Another way of seeing it is imagining you see a long line of people lined up to buy gold. As so many people are looking to buy it, it’s safe to assume that the price will go up. So you decide to buy some too. As so many people are buying gold, the price does go up. But it turns out that the people who started the cue never bought any gold at all. Instead, as the price has now gone up, they’re selling their gold and your gold ends up being worth less than when yo u bought it. (Now, that’s not something that would have ever happened, as you’d never find all the world’s gold in one store, but it’s a great way of illustrating the point.)

Why It Matters

• Spoofing manipulates the market by influencing the actions of other traders, creating false price movements.
• It undermines market integrity and can lead to unfair trading conditions.

In short, spoofing tricks the market into thinking there’s more buying or selling interest than there actually is, allowing the spoofer to capitalize on the resulting price movement.

On Ouinex we banned spoofing. Market makers cannot set large orders that they then cancel once the market gets close to that price.