Order Layering

Order layering is a manipulative trading strategy where a participant places multiple limit orders at varying price levels on one side of the order book to create a false impression of significant buying or selling pressure. By stacking these orders, the trader attempts to induce other market participants to trade against the perceived trend, thereby moving the price in the trader's favor.

Once the price moves as intended, the layered orders are quickly canceled before they can be executed. This technique exploits the visual nature of order books and the psychological reactions of traders who rely on momentum.

In regulated financial markets, this practice is considered market abuse and is strictly prohibited. Within the context of cryptocurrency, the lack of centralized oversight can make this tactic more prevalent, contributing to artificial volatility.

It is a key component of what constitutes order book clutter, as it fills the book with temporary, non-binding commitments.