2023-09-02 14:43:42
What are Iceberg Order ?
Iceberg orders, also known as hidden orders or reserve orders, are a type of trading order used in financial markets, including stock exchanges and cryptocurrency markets. These orders are designed to conceal the full size of a trader's order from other market participants while still allowing them to execute a large trade.
Here's how iceberg orders work:
1. Large Order: When a trader wants to buy or sell a significant quantity of an asset (such as stocks or cryptocurrencies), executing the entire order at once could have a substantial impact on the market price. To avoid this, the trader splits the large order into smaller "visible" and "hidden" portions.
2. Visible Portion: The visible portion is the quantity of the order that is displayed in the order book for other market participants to see. This portion is typically a smaller fraction of the total order size and is intended to attract attention and create liquidity in the market.
3. Hidden Portion: The hidden portion, also known as the "reserve," is the remaining quantity of the order that is not displayed in the order book. It is kept hidden from other traders and is only revealed when the visible portion is completely executed. When this happens, a new hidden portion is automatically added to the order book until the entire order is filled.
The primary benefits of iceberg orders are:
- Reduced Market Impact: By keeping the full order size hidden, traders can reduce the immediate impact of their large orders on the market price. This can help them get a more favorable average price for their trade.
- Avoiding Front-Running: Concealing the full order size makes it harder for other traders to anticipate and front-run the order, as they don't know the total quantity being traded.
- Maintaining Privacy: Traders can maintain a level of privacy about their true trading intentions, which can be important for institutional investors and large traders.
Iceberg orders are a common tool used by institutional investors and professional traders in markets where order book transparency is important. However, they can also be used by retail traders on platforms that offer this order type. It's essential to understand the rules and fees associated with iceberg orders on the specific trading platform you are using.
17.3K viewsChris Pulver, 11:43
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