Have you ever tried to interpret the DOM, price ladder, or matrix? You’ve seen the bid and ask move in real-time – representing orders waiting to get filled either long or short. About 15 or 20 years ago, it was possible to use tape reading (the olden days equivalent of DOM interpretation) to gauge support and resistance levels.
Nowadays, you can’t trust the buy and sell quantities that appear on the DOM. This is because phantom orders exist. Phantom orders only exist for a brief period of time without a chance of ever being filled. This skews the types of calculations that were once possible using tape reading. Remember, many of these orders are placed for manipulative reasons by high frequency trading systems, perhaps to entice retail traders. When price nears the phantom orders, they disappear as if they were automatically pulled from the market.
“Phantom orders occur every single day. These orders may lure you in to place stops at dangerous levels (based false support and resistance buy/sell order data.)”