Term: Iceberg Order
Type: Advanced trading order
Used in: Stock, futures, crypto, and options markets
Name origin: Like an iceberg, only a small part is visible
Also known as: Hidden order, partial display order
Definition
An iceberg order is a large buy or sell order that’s broken into smaller visible portions to hide the full trade size from the market. Only a fraction of the total order is shown on the order book, while the rest remains hidden and is revealed in stages as each visible portion is filled. This strategy reduces market impact and helps institutional traders avoid signaling large moves.
Key Features
- Partial Visibility: Only part of the full order is visible at any given time
- Automatic Replenishment: As visible portions fill, more shares appear
- Reduces Slippage: Minimizes price movement caused by large trades
- Execution Strategy: Typically used in algorithmic or high-frequency trading
- Market Neutral Appearance: Prevents detection of large buying or selling intent
Common Use Cases
- Institutional traders executing large volume trades
- Reducing exposure to front-running or price slippage
- Concealing trading strategies from competitors
- Used in high-liquidity markets like equities and crypto
Benefits or Advantages
- Preserves trade secrecy and anonymity
- Limits market reaction to large orders
- Allows for gradual execution without flooding the book
- Helps get better average prices for large positions
Examples or Notable Applications
A hedge fund wanting to buy 100,000 shares may display just 1,000 at a time. Popular on platforms like NYSE, Nasdaq, and crypto exchanges with iceberg functionality. Can be part of smart order routing systems used by algorithmic traders.
External Links
This post is for informational purposes only and does not constitute trading or financial advice.