Over time, the digital currency market has become like a vast and profitable sea, which has attracted the greedy eyes of many users. Although knowingly entering this market with the help of digital currency analysis and some other tools, prevents many possible losses; But still, there are dangerous predators in this sea who strengthen their fraud methods every day. One of these methods is spoofing Registration of fake orders It is in trading, which is one of the most dangerous trading methods. In this article, we have uncovered the secrets of spoofing; We also show how spoofing can take away all your assets without magic.
What is meant by spoofing?
Spoofing, one of the types Scam in which some users register fake buy or sell orders with the help of a bunch of robots or smart algorithms. As you know, the digital currency market, like other financial markets, is based on supply and demand fluctuations. Someone who can control these two parameters; It will rule the cryptocurrency world. By taking advantage of this fact, some fraudsters try to increase the amount by registering fake buy or sell orders supply and demand affect a cryptocurrency.
How does spoofing deceive users?
Now that we understand what Spoofing is, let’s move on to how it works. Arguably, the main job of spoofing attacks is to affect your emotions. To do this, the spoofer tries to trick your mind with a bunch of buy and sell orders. To better understand this scam, imagine a spoofer is going to buy some Ethereum. If he wants to Technical analysis tools use, maybe he can correctly recognize the buy signals; But usually, spoofers intend to buy their cryptocurrency at a much lower amount and as much as they want.
To do this, they place a large number of buy orders slightly above the resistance level. With this action, many users are disappointed by breaking the resistance limit and think that this resistance limit will not be broken again; Therefore, the wave of registration of sales orders has started and the price trend is decreasing. At this time, the bots that registered fake orders wait for the desired cryptocurrency to decrease to the target price. As soon as the desired price is approached, all fake buy orders are canceled. Now the spoofer can buy his cryptocurrency at the lowest price.
What is the purpose of registering fake orders?
You may think that spoofers register fake orders just to buy and sell at desired prices; But it is not. The goals behind spoofing can be very different, and we will mention a few of them below:
- To ensure profitable positions Margin or futures transactions
- To accumulate users’ assets in the desired digital currency network
- To control the direction of the market (keeping the price stable in a range or prolonging the duration of a price trend, etc.)
- To influence the emotions of users and encourage them to temporarily buy or sell at a certain price range for immediate profit
Does spoofing always work?
It is good to know that spoofing that usually with the help of High frequency trading is done, it does not always reach its goal. Sometimes this method of fraud itself becomes a factor in the downfall of the spoofer; but how? To answer this question, let’s go back to the same example as before. If the spoofer registers many fake buy orders at a level above the resistance level; Digital currency users may suffer from FOMO or fear of missing out. In this case, instead of sell orders, buy orders will increase and the spoofer will not reach its goal, which was to reduce the price.
Is it illegal to falsify financial orders?
It is interesting to know that in the United States, falsifying financial orders is illegal and a criminal act, according to Rule 747 approved by the United States Futures Trading Commission (CFTC). Accordingly, the Securities and Exchange Commission of this country (SEC) defines financial penalties for spoofers. For example, in 2020, JP Morgan was fined more than $1 billion by the same institution; Because he tried to forge orders in the field of precious metals. However, this method of fraud is still not recognized as a criminal act in many countries, and this has worried users; Because it is difficult to detect fake orders and a method to deal with it has not yet been introduced effectively and definitively.
How to avoid spoofing?
Although registering fake orders is a complicated process; But it can still be avoided. For this, it is enough to use an efficient and strong strategy. Usually, focusing on long-term goals and ignoring false emotions in the financial market in question can help you in this field. It goes without saying that riding the wave of the market without having a strategy is a destructive practice and will trap you in the trap of spoofers.
5 interesting facts about spoofing that you should know!
In this section, we are going to discuss 5 interesting facts about spoofing; Facts you may find less often:
- Every bulk order is not spoofing; In addition, it is difficult to recognize the authenticity of these orders.
- Forgery of orders is more common in small and retail markets; As we mentioned, this method is done with the help of robots that are faster than humans.
- Spoofing is different from layering. Lying is similar to Spoofing; with the difference that several orders are registered in different positions consecutively to increase the price of a digital currency.
- Some arbitrage transactions may look like order spoofing.
- You can also do spoofing; Of course, because this method requires high speed, you have to get help from robots.
What is spoofing? Introduction of fake orders or spoofing in financial markets for the first time in Wallex blog. appeared.
