Probing, Testing, and Spoofing

Probing, Testing, and Spoofing

Bookmap’s real-time liquidity tracking makes it possible to identify (and benefit from) the strategies of influential market participants. In the following trading scenario, unique Bookmap features allow us to understand every aspect of order flow as it unfolds.

 

First, a band of high liquidity appears on the heatmap as a large sell limit order is placed near the BBO (see Figure 3 below). This high sell liquidity from a larger player serves as a test for buyer aggression; if a sufficient number of buyers pursue this new supply of contracts, the seller is likely to cover and potentially initiate a long position if this bullish sentiment is subsequently confirmed. If the aggressive buying into this sell liquidity diminishes, aggressive sellers will likely jump in and hit the bid. Limit sell liquidity may also chase after the dropping price.

 

Exploiting a Spoof Test in Bookmap

Bookmap’s real-time liquidity tracking makes it possible to identify (and benefit from) the strategies of influential market participants. In the following trading scenario, unique Bookmap features allow us to understand every aspect of order flow as it unfolds.

 

First, a band of high liquidity appears on the heatmap as a large sell limit order is placed near the BBO (see Figure 3 below). This high sell liquidity from a larger player serves as a test for buyer aggression; if a sufficient number of buyers pursue this new supply of contracts, the seller is likely to cover and potentially initiate a long position if this bullish sentiment is subsequently confirmed. If the aggressive buying into this sell liquidity diminishes, aggressive sellers will likely jump in and hit the bid. Limit sell liquidity may also chase after the dropping price.

 

Figure 1: The cursor points to high liquidity on the heatmap corresponding with a large sell limit order.

 

Figure 2: Green volume bubbles indicate buyer
aggression through the liquidity provided by the spoof.

 

The green volume bubbles in the chart tell us that this flash of liquidity has been met by a large quantity of buy market orders, Bookmap’s in-chart liquidity and volume indicators quite literally intersect.

 

The test, transaction, and follow-through into and above this quick flash of high liquidity at 2650.75 determine there is lots of buying appetite. We know buyers are in control and we can anticipate higher prices to be discovered.

 

Figure 3: The buying pressure revealed by the test continues through the area of interest. As the price approaches high liquidity again, we witness even more buying pressure, especially at 2652. Note the steady accumulation of aggressive buying pressure and how it leads to price discovery.

 

As expected, the price continues toward the next band of liquidity on the ask at 2652 and 2625.25, confirming short-term buying pressure. Note how the liquidity at 2652.25 is pulled as buyers accumulate a substantial number of contracts over a period of about ten seconds. The context between buying pressure and pulling of sell liquidity lends insight to further price discovery to the upside.

 

Because Bookmap displays the order book as it updates in real-time – instead of aggregating data like most charts – we can clearly see this accumulation on a per order basis. The chart-range volume profile (CVP) column on the right panel indicates volume traded at each level, confirming that 921 contracts have traded at 2652.00 with aggressive buyers in control. The cancellation of sell limit orders and subsequent accumulation represent further signals that buyers are in control.

 

Summary: Following the Major Players

 

Unique Bookmap features such as liquidity on the heatmap, real-time order tracking, and 3D volume bubbles make it easy for any trader, regardless of account size or resources, to spot and exploit the tactics of those with enough capital to truly affect the market movements.

 

Watch these videos on how to gain insight from market pressures, probing, and follow-through:

 

 

 

 

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