Spoofing

Spoofing is a manipulative trading strategy where a participant places a large number of orders with no intention of executing them, simply to create a false impression of market pressure. By placing these large buy or sell orders, the spoofer attempts to trick other market participants into reacting, allowing the spoofer to profit from the resulting price movement.

Once the price moves in the desired direction, the spoofer cancels the large orders and executes a trade on the other side. This practice misleads market participants about the true state of supply and demand and undermines the efficiency of the order book.

Sophisticated surveillance systems are used to detect these patterns by analyzing the frequency of order cancellations and the timing of trades. Spoofing is prohibited in regulated markets and is increasingly targeted in crypto exchanges.