Spoofing places fake orders to manipulate price, then cancels them. Absorption happens when a wall of spoof orders sits above thin real demand. Iceberg orders hide a large quantity behind small visible orders, absorbing the pressure those fakes create.
people talk about spoofing and this idea of like, there's a pool of orders waiting above. So the market is attracted towards that, that is going to be buy and sell limits, not the buy stops, sell stops. Correct.
It's a bunch of buy limits or sell limits, but they're generally not put to attract liquidity. They're trying to put a wall of fake orders there, or ghost orders that are going to be taken out of the market as soon as the market reached it. Because they're trying to fill something below. So what you usually do when you want to trade a spoofing is you're also looking for a so-called absorption. So in the sell limit, there's a bunch of orders, and then below there's very few orders that are in the book. But here there's not a lot of orders actually executed. No one is really buying into them, and if someone tries to buy, they disappear. So they are fake order. This is spoof orders or layered orders. And then you would see downstairs all these sell orders are trying to make the market believe that we're going down and that there's someone big saying we're going down today, guys. And what's happening really in the lower part is in the buy limit side, they're putting a so-called iceberg order. And an iceberg order is they're not sure— the opposite of a spoofing. So they're showing just maybe 10 contracts, but they have ready around 100 or 1,000 contracts. Every time they get executed, they put a little bit. It's a domino effect. So it's a domino effect, and they get filled by not showing that they have an order but absorbing all the selling pressure that they are artificially creating with the spoof orders up.
