Momentum Ignition - Downward

Description

This test is designed to detect manipulative trading behaviors where an actor attempts to artificially induce downward directional price movements in a trading pair to capitalize on the resulting market reactions. This is often achieved by submitting a large aggressive sell market order within a short time frame with the goal of triggering stop orders or other automated trading mechanisms. Once the price moves favorably, often breaking a support level, the manipulator exits their position, profiting from the induced volatility. This behavior is often characterized by sudden bursts of trading activity and abnormal price movements that deviate significantly from historical patterns.

Use Cases

• Market Manipulation Detection: Identify trading patterns indicative of price manipulation through rapid and aggressive order submissions.

• Prevention of Cascading Market Reactions: Flag activities designed to trigger stop orders and disrupt market equilibrium.

• Anomaly Detection in Trading Activity: Detect abnormal bursts of activity that deviate significantly from historical trading norms.

Required Data

Trades Data

Variable	Description
timestamp	Timestamp of the trade made (YYYY-MM-DD hh:mm:ss).
user_id	User ID to identify the individual user.
symbol_pair	The asset symbol; e.g., BTCUSDT, SHIBETH, DOGEUSDT.
side	Whether the trade is a BUY or SELL.
price_usd	The price of the symbol in USD.
amount	The amount of the symbol being traded.

Parameters

Parameter	Description	Type	Default Value	Configurable
analysis_rolling_window_seconds	Duration of the rolling window for analysis and metrics computation, in seconds.	Integer	30	Yes
resampling_period_seconds	Period for resampling historical data, in seconds.	Integer	30	Yes
resampling_number_historical_windows	Number of historical resampling periods to calculate volume spikes.	Integer	20	Yes
analysis_price_change_threshold	Threshold percentage for identifying significant price momentum.	Float	0.03 (3%)	Yes
historical_volume_spike_multiplier_total	Standard deviation multiplier for detecting total volume spikes relative to historical averages.	Float	1.0	Yes
historical_volume_spike_multiplier_buy	Standard deviation multiplier for detecting buy volume spikes relative to historical averages.	Float	1.0	Yes
historical_volume_spike_multiplier_sell	Standard deviation multiplier for detecting sell volume spikes relative to historical averages.	Float	1.0	Yes
analysis_buy_direction_ratio_threshold	Minimum buy-to-total trade ratio for consistent buy direction.	Float	0.5 (50%)	Yes
analysis_sell_direction_ratio_threshold	Minimum sell-to-total trade ratio for consistent sell direction.	Float	0.5 (50%)	Yes
analysis_momentum_user_contribution_threshold	Minimum volume contribution percentage in analysis window by a user to flag for momentum ignition.	Float	0.3 (30%)	Yes
post_trade_window	Time window (in seconds) after the analysis period to analyze subsequent trading activity for profitability.	Integer	300	Yes
momentum_ignition_filter_pnl	Flag to filter momentum ignition events based on profitability (PnL).	Boolean	True	Yes
momentum_ignition_pnl_percentage_threshold	Minimum PnL percentage threshold for filtering momentum ignition events.	Float	0.03 (3%)	Yes
analysis_minimum_aggregate_dollar_threshold	Minimum dollar volume threshold in analysis window for trades to be considered.	Float	100.0	Yes

Methodology

• Calculate Rolling Metrics Compute metrics over a rolling time window (analysis_rolling_window_seconds), including:

• Total volume, total dollar volume, average price, start price, and end price.
• Buy and sell counts, volumes, and dollar volumes.

• Detect Price Momentum Calculate the rolling price change percentage:

• Flag trades with significant negative price changes exceeding the analysis_price_change_threshold.

• Analyze Volume Spikes Identify volume spikes for total, buy, and sell volumes by comparing rolling metrics to historical averages using multipliers (historical_volume_spike_multiplier_total, historical_volume_spike_multiplier_buy, historical_volume_spike_multiplier_sell).

• Check Trade Direction Consistency Calculate the ratio of buy-to-total and sell-to-total trades within the rolling window.

• Flag trades with consistent buy directions exceeding their respective thresholds (analysis_buy_direction_ratio_threshold and analysis_sell_direction_ratio_threshold).

• Identify Users Driving Momentum Group trades by user within the rolling window to compute:

• User-specific buy/sell volumes, dollar volumes, trade counts, and volume-weighted average prices (VWAP).
• User contributions to total momentum based on their volume share compared to the rolling total.
• Flag users contributing significantly to momentum ignition (analysis_momentum_user_contribution_threshold).

• Post-Trade Analysis Analyze trading activity in the post_trade_window to determine the impact of flagged trades on subsequent market movements.

• Profitability Filtering (Optional) Filter flagged momentum ignition events based on profitability (momentum_ignition_filter_pnl) by calculating the user's profit and loss (PnL) percentage relative to the trade.

• Final Flagging Trades are flagged as Negative Momentum Ignition if they meet all conditions:

• Significant price change.
• Volume spike in sell activity.
• Direction consistency.
• Significant user contribution to the momentum event.