Iceberg or hidden orders

The term "iceberg" comes from the fact that the visible lots are just the "tip of the iceberg" given the greater number of limit orders ready to be placed. They are also sometimes referred to as reserve orders.


- Iceberg orders are large orders that are split up into lots or small sized limit orders. They are split up into visible and hidden parts, with the latter transitioning to visibility after the former type of order is executed.

- They are typically placed by large institutional investors to avoid disrupting trading markets with a single, large order.

- Traders can profit off iceberg orders by buying shares just above the price levels supported by initial batches of an iceberg orders.

Basics of Iceberg Order

Iceberg orders are mainly used by institutional investors to buy and sell large amounts of securities for their portfolios without tipping off the market. Only a small portion of their entire order is visible on Level 2 order books at any given time. By masking large order sizes, an iceberg order reduces the price movements caused by substantial changes in a stock's supply and demand.

For example, a large institutional investor may want to avoid placing a large sell order that could cause panic. A series of smaller limit sell orders may be more palatable and disguise the extant selling pressure. On the other hand, an institutional investor looking to buy shares at the lowest possible price may want to avoid placing a large buy order that day traders could see and bid up the stock.

Previous research has indicated that traders tend to place order types similar to the amount and pattern of iceberg orders, thereby increasing liquidity and minimizing impact of the iceberg order on overall trading.

Identifying Iceberg Orders

Traders can identify iceberg orders by looking for a series of limit orders coming from a single market maker that constantly seems to reappear. For example, an institutional investor might break an order to buy one million shares into ten different orders for 100,000 shares each. Traders have to watch closely to pick up on the pattern and recognize that these orders are being filled in real-time.

Traders looking to capitalize on these dynamics might step in and buy shares just above these levels, knowing that there's strong support from the iceberg order, creating an opportunity for scalping profits. In other words, the iceberg order(s) may serve as reliable areas of support and resistance that can be considered in the context of other technical indicators.

For example, a day trader may notice high levels of selling volume at a certain price. They may then look at the Level 2 order book and see that most of this volume is coming from a series of similarly-sized sell orders from the same market maker. Since this could be the sign of an iceberg order, the day trader may decide to short sell the stock due to the strong selling pressure from the constant stream of limit sell orders.

Exchanges typically prioritize orders based on the sequence in which they are received. In the case of an iceberg order, the visible portion of an order is executed first. The hidden portion of an order is executed only after it becomes visible in the order book. If traders have already placed orders similar to the iceberg order, then they are executed after the visible portion of an iceberg order.

Example of an Iceberg Order

Suppose a large pension investment fund wants to make an investment of $5 million into stock ABC. News of the fund's investment could cause a massive spike in ABC's price within a short period of time. To avoid such a disruption, the fund devises an iceberg order that splits its original order into smaller lots of $500,000 each.

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