When depth feeds lie

[Shadow Trader]

Depth of market windows show bids and offers at multiple levels. Many scalpers watch them for clues. A few cautions apply.

Displayed liquidity isn't a commitment. Orders can be pulled in a fraction of a second, and large visible size may disappear as price approaches. Some of it may never have been real, with sizes shown by the broker's aggregator that don't reflect what can actually be traded.

The data is also broker-specific. It reflects the broker's own aggregation, not the wider market, so patterns seen on one venue may not appear on another.

Update speed matters. A depth panel refreshed every few hundred milliseconds can show a stale picture during fast moves.

Spoof-like behaviour, large orders placed to influence perception and then cancelled, is a known phenomenon in electronic markets, though less visible in retail forex than in futures.

Treating depth as a rough hint, and confirming against actual fills and price action, keeps expectations grounded. A test with small orders at the displayed size shows how real the liquidity is.

An illustration: the depth panel shows 5 million at the best offer. A buy order for 2 million fills only partly at that price, with the rest at the next level, because part of the displayed size was a different counterparty's with a minimum fill amount, or because the liquidity disappeared as the order arrived. The only way to know is to test with real orders.

Has depth information ever proved useful, or misleading, in live trading?