{"id":10183,"date":"2011-03-03T08:26:02","date_gmt":"2011-03-03T13:26:02","guid":{"rendered":"http:\/\/www.smbtraining.com\/blog\/?p=10183"},"modified":"2021-05-06T15:23:54","modified_gmt":"2021-05-06T19:23:54","slug":"traders-ask-fake-order-flow","status":"publish","type":"post","link":"https:\/\/www.smbtraining.com\/blog\/traders-ask-fake-order-flow","title":{"rendered":"Traders Ask: Fake Order Flow?"},"content":{"rendered":"

Dear Bella,
\nThanks for writing your book as I’ve found it immensely useful!<\/p>\n

Regarding order flow, I’ve heard people saying that institutions and big traders place large buy orders hoping other traders bid in front of those orders. The institution will then sell those bids. In many ways it’s a game of cat-and-mouse that often goes unnoticed by new traders.<\/p>\n

How true is the above and if so, how would you react\/interpret it in your trading? Could it be possible
\nthat they are doing it to pump the stock price up in order to sell higher later?<\/p>\n

Bella Responds<\/strong><\/p>\n

First I would like to offer a joking response. \u00a0Do\u00a0institutions enter fake bids and offers to induce buys and sales in their favor? \u00a0Of course they don’t. \u00a0That would be so classless at best and unethical at worst. \u00a0That would never happen on the Street. \u00a0This is a place for gentlemen\/women who only act in the best interests of the nation, like teachers and those serving. \u00a0Also if you found value from One Good Trade<\/em>, would it kill you to make a stop on Amazon and leave a review: \u00a0http:\/\/amzn.to\/fvN3p8\u00a0?<\/p>\n

Now for the answer. \u00a0Sure that can happen. \u00a0Remember we make trading decisions based upon three factors: intraday fundamentals, Reading the Tape, and Technical Analysis. \u00a0So a big order such as you described would only in unusual circumstances trigger a trade for us. \u00a0So really your question is when these big orders are placed what information can we learn as it relates to Reading the Tape?<\/p>\n

There are patterns that you will spot from the Level II. \u00a0If you see fake bids going in to trigger sales on the offer, then when you see a big fake bid you know what it means. \u00a0 An Old School trade was to spot a huge order in the NYSE Book and place a trade in the direction of that order. \u00a0There are still trades to be made following the side of a very large offer, but they are much rarer. \u00a0 Also, more specifically in the late 90s we all knew that GS to the bid prominently on the Tape meant he was selling. \u00a0So we got short.<\/p>\n

Trading is just a game of pattern recognition. \u00a0Spot the patterns and place excellent risk\/reward trades. \u00a0Good traders do not spend much time caring whether an\u00a0institution\u00a0or HFT is trying to game the system? \u00a0They just decode the pattern and find ways to profit.<\/p>\n

Mike Bellafiore<\/p>\n

Author, One Good Trade <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Dear Bella, Thanks for writing your book as I’ve found it immensely useful! Regarding order flow, I’ve heard people saying that institutions and big traders place large buy orders hoping other traders bid in front of those orders. The institution will then sell those bids. In many ways it’s a game of cat-and-mouse that often goes unnoticed by new traders. … Read More<\/a><\/p>\n","protected":false},"author":144,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[10,7],"tags":[1642,336,338,81,1193,653],"class_list":["post-10183","post","type-post","status-publish","format-standard","hentry","category-mike-bellafiore-bellas-blogs","category-reading_the_tape","tag-level-ii","tag-order-flow","tag-reading-the-tape","tag-smb-training","tag-trader-education","tag-trader-training","no-post-thumbnail"],"yoast_head":"\nTraders Ask: Fake Order Flow? | SMB Training<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.smbtraining.com\/blog\/traders-ask-fake-order-flow\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Traders Ask: Fake Order Flow? | SMB Training\" \/>\n<meta property=\"og:description\" content=\"Dear Bella, Thanks for writing your book as I’ve found it immensely useful! Regarding order flow, I’ve heard people saying that institutions and big traders place large buy orders hoping other traders bid in front of those orders. The institution will then sell those bids. In many ways it’s a game of cat-and-mouse that often goes unnoticed by new traders. ... 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