HFT Spoofing Mechanics in Gold and Silver- Part 1 of 3

Algorithms Are Spoofing Gold and Silver

" If you want someone to buy from you, you have to bid first to get them to join you. Then you smack their bids. Otherwise how will you get exit liquidity? "


submitted by Soren K.

Written by Vince Lanci - We have described the mechanics of spoofing markets many times over the years. During my 25 year trading career I have seen it in trading pits as an option marketmaker and on screens. What we have known for years but could only induce from evidence and Bayesian probabilities, Nanex founder Eric Scott Hunsader has made a science out of.  

Yesterday in Silver

Here are his observations on Gold and Silver  from twitter

  • Every single morning, I notice 100-lot orders suddenly appear, then disappear in COMEX (CME) gold futures

  • The 100-lot spoof pattern seen in Gold shows up in Silver too.

  • Between 3:30 - 4:30 ET in Silver futures today, a 100 contract buy order was placed/canceled 207 times.

  • During this same period, a 100 contract sell order was placed/canceled 246 times


Visual Proof

While we see imperfections in market structure, Nanex has pointed out exactly where they exist. Using the same inductive process but armed with the technology to recognize micro patterns in electronic trading, Michael has proven as far as we are concerned that spoofing markets is a far bigger problem than most people understand.

Recommend following Eric for insights into market structure, spoofing, and HFT analysis

Twitter @nanexllc

Website: Nanex.net

The Algorithms Have One Mission

Note this spoofing is to make money. It is not bearish or bullish manipulation. It is basically stop-fishing and front-running. So what is happening  during time periods of these order flows?

Hunsaker Opines:

“Someone turns on a money machine. Really”

From our experience we believe he simply means that an algorithm that has been optimized for a certain time frame to maximize its profit potential is simply turned on. A switch is hit and the money is printed.

That is all

Read more by Soren K.Group