Course Content
What Is Spoofing in the Financial Markets?
Author: Joseph Young Spoofing is a form of market manipulation where a trader places fake buy or sell orders, never intending for them to get filled by the market. Spoofing is usually done using algorithms and bots in an attempt to manipulate the market and asset prices by creating a false sense of supply or demand. Spoofing is illegal across many major markets, including the United States and the United Kingdom.
What Is Spoofing in the Financial Markets?
About Lesson

Spoofing can become riskier when there is a higher probability of unexpected market movements.

For instance, let’s assume a trader wants to spoof sell a resistance level. If there is a strong rally taking place and the Fear Of Missing Out (FOMO) among retail traders suddenly drives massive volatility, the spoof orders can quickly fill. This is obviously not ideal for the spoofer, as they didn’t intend to enter the position. Similarly, a short squeeze or a flash crash can fill even a large order in a matter of seconds.

When a market trend is mainly driven by the spot market, spoofing becomes increasingly risky. For example, if an uptrend is driven by the spot market, indicating high interest for directly buying the underlying asset, spoofing may be less effective. However, this is largely dependent on the particular market environment and many other factors.