How do whales use fake walls to manipulate the prices. Can we ride those whales and profit?
I was recently seeing this video on youtube on the topic of High frequency trading. The guy was telling about trading volumes on the buy and sell side, and how it is the most important metric for high frequency trading. I didn't really bother to understand the whole video, but one thought that came into my mind was that whales could actually manipulate the prices by putting fake sell or buy orders.
Now, imagine you are a whale, and you put a huge buy order at $100/coin for a coin. Now other people who are trying to buy that coin would notice the wall, and try to bid at higher prices. After a while, that whale would cancel its buy order, and start selling its coins. In other words, that whale artificially inflated the price, so that it could sell its coins at a higher price later on. It could also do the same thing in reverse to buy coins at a cheap rate.
There are some good answers given also in this reddit thread about this topic. While we can't be whales ourselves, at least we can ride them. By riding I mean noticing such walls and taking actions accordingly.
For example, in the case of a bid wall, we should not bid much higher than the wall itself, but bid just a little over it. This is only possible, if you do the bid quickly after seeing the wall. Later on, when the price goes high, you can sell. Doing this sort of trading manually would obviously be difficult. However, using some intelligent algorithm, I think this can be done effectively through a program.
So, what do you guys think? Is it worth the time trying to make such a program?
sometimes it is really easy to spot fake walls and other times it is really damn near impossible.
the easiest way i have found is to check new orders coming in over a 10-20 minute period. it usually will tell you if there is any whales playing around at that time.
but its never 100% accurate.
Yup, that is why the need for an intelligent algorithm. Maybe, deep learning would help.
You have given a interesting perspective and a problem to work on. In order to know about whether the bid would be fake or not, we need to identify the whale and we should have past history of fake bids by that user. That is one approach to construct the intelligent algorithm. I think it's definitely worth to make such a program.
I do believe on whales because they are the real manipulator of one coin with their big money going in the market and choosing an individual coin makes the volume big and the small players go in also and after the whales got what they want they dump it hard for small players.
I also seen this video and really even i didn't understand whole video.
Hahaha, ya I understood some but the rest went over my head!
I would love to see some software for market analysis!!!
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