medium · Order Flow Analysis order-book-dom
On a thin futures DOM you observe a 4,000-lot resting bid at a price 3 ticks below the inside bid, while the inside bid (50 lots) is repeatedly hit and refilled. As price grinds down toward the large level, the 4,000-lot order is steadily reduced to 3,200 as trades print into it — but at no point does the bid price disappear or refresh lower.
Which inference about that 4,000-lot level is best supported?
- It is a genuine absorption bid taking initiative-sell flow without pulling, consistent with a passive participant willing to be filled at that price
- It is a spoof, since visible size far exceeds the inside-bid size, and unusually large displayed orders are presumptively non-bona-fide
- It is iceberg replenishment, since the displayed quantity declined steadily rather than the order being canceled and re-posted at that price
- It is responsive selling disguised as a passive bid, because resting size placed below the market draws price toward it to trigger nearby protective stop orders
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