Iceberg Order
Candlefocus EditorIceberg orders can be divided into two parts, the visible and the hidden. The visible portion of the order is the part of the trade that will be immediately executed, while the hidden portion will transition into the visible portion after the initial order is executed. The visible portion of the iceberg order will be at the optimal price level according to the stock or index being traded. It will appear to other market participants like any other order in the market, which masks the size of what the investor or trader is actually trying to purchase.
Traders can benefit from iceberg orders in a variety of ways. By being aware of the presence of an iceberg order, traders can purchase shares just above the price point supported by the initial orders. As the hidden portion of the order becomes exposed, the price of the stock is likely to rise and the trader would therefore make a profit.
Iceberg orders can play an important role in the markets, as they’re an effective way to avoid exaggerating the size of an order, thereby reducing the potential for disruption in the market. Institutional investors use iceberg orders to slowly and steadily build up positions, while traders can hedge their positions against the dangers of price manipulation caused by large investors by entering the market right after an iceberg order is partially filled.