Unlike traditional financial markets, crypto currency exchanges are largely unregulated, and virtually all BTC and Bitcoin traders are familiar with various stories detailing the degree to which certain aspects of crypto currency market price action are manipulated.
Despite this, many traders feel there is little they can do to avoid the whims of the whales and the unethical market makers who shape the market to their advantage. Strategies such as impersonation and hidden orders are common obfuscation tactics that smart traders use to influence prices in cryptomonies.
Tracking the movements of manipulators is a game of cat and mouse, but there are strategies that retail traders can use to get around them. Let’s take a look at three strategies used by whales and how a trader can avoid being cheated by them.
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Hidden orders are used to place large undetected quotes and orders in the order book of an exchange. They allow automatic replenishment (iceberg) after each filling, thus avoiding detection in the exchange order books.
This strategy is the opposite of a buy/sell wall, where a trader falsifies the market by placing large orders with no intention of executing them. Hidden orders generally involve large quantities, and are available for anyone to use on most cryptomoney exchanges.
Most buying and selling walls are not meant to be executed; they are meant to represent a large flow, but are usually cancelled the moment the market reaches its levels. Very few whales would self-report their flow before execution.
A simple way to avoid being fooled by a hidden order is not to monitor the order book like a hawk. The less you depend on measuring the depth of the order book, the better. Most Bitcoin Code exchanges allow traders to minimize the order book from the trading screen view.
Some traders consider order book flow an essential part of their trading routine, and more sophisticated tracking programs are readily available. It is worth noting that market makers and algorithmic traders also know how to manipulate them.