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Spoof | Spoofer | Spoofing

Spoof order is one that is placed in the market, where the trader has no intention of having the order filled.

Spoof orders are placed in an attempt to manipulate other market participants into believing that there is more liquidity at a specific price or prices, than what is really available. The Spoofer will allow price to get close to their orders, but prior to the market reaching this level, the Spoofer will quickly withdraw the orders and the liquidity will disappear from the Order Book.

Spoofing was made illegal in 2010 as part of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, but evidence of the practice can still be seen in order flow tools such as Bookmap (order flow heatmap) or in a DOM. Traders still might be able to spot behavior that may related to Spoofing, by looking for high levels of liquidity that quickly disappear once price approaches them.

Because the Spoofed orders that have been submitted are real, Spoofers risk having their orders filled if they are unable to withdraw the orders fast enough as the market approaches.

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