Iceberg Order Definition
An Iceberg Order is a large single order that has been divided into smaller limit orders for the purpose of hiding the actual order quantity. This is usually done by institutional investors who make big trades. The name comes from the idea that you will only see the small “tip” of the total order, while the majority of it remains unseen, like an iceberg.
Iceberg Order Key Points
- An Iceberg Order is often used by large market participants who want to conceal the true size of their order.
- It involves breaking down a single large order into many smaller orders to prevent significant market impact.
- Only a part of the order, known as the “visible” or “disclosed” portion, is seen in the market, while the rest of the order remains hidden.
- These types of orders are prevalent in both stock and crypto markets.
What is an Iceberg Order?
An Iceberg Order is a trading strategy used typically on financial markets, including the crypto market. When a trader makes a considerable investment that could potentially influence the market price, they can choose to use an Iceberg Order. This conceals the total amount of their order.
Who Uses Iceberg Orders?
The strategy is mostly used by Institutional investors, high-net-worth individuals, and trading firms, who want to buy or sell a significant quantity of a specific asset but do not want to reveal their true intentions to the market. They use an Iceberg Order to prevent causing a drastic price change due to their large order size.
When are Iceberg Orders Used?
Iceberg Orders are typically used when placing a large order that, if executed all at once, would cause a drastic price change in the market. They allow a trader to still execute their large order without causing a significant market impact.
Where are Iceberg Orders Used?
Iceberg Orders are typically seen on stock and crypto exchanges. Most modern stock exchanges, as well as many digital asset trading platforms, offer the capability to place Iceberg Orders.
Why are Iceberg Orders Used?
The primary reason for the use of Iceberg Orders is to evade detection and avoid influencing market prices. If a large order were placed all at once, it could lead to significant changes in the market price – potentially detrimental to the trader placing the order.
How are Iceberg Orders Implemented?
A trader decides on the total quantity of the order and selects the portion of the order to be visible. The visible part is posted on the public market, while the non-visible part is hidden. As the visible portion of the Iceberg Order is filled, the hidden part of the order is continuously revealed in parts until the total order is completely filled.
