What is an iceberg application
An iceberg order (order) is a large trade order, which is divided into several smaller ones. It is used to buy or sell large amounts of cryptocurrency.
For large transactions, such as the sale of 100,000 bitcoins, such a request will immediately attract attention.
Most often, a sharp decline in the value of the cryptocurrency leads to market destabilization. And it will affect not only the one who placed the big order, but also all the other traders.
If market players want to execute large trades, they divide them into several smaller ones. This will allow you to go unnoticed – often no one reacts to small orders.
Traders find out after the fact, when the order has already been executed, that it was a large order.
Who uses iceberg orders and why
Iceberg Bids are a way to avoid large changes in the crypto market, such as large price spikes. They are an easy way to avoid market panic.
Based on a logistical plan, all transactions are carried out in a structured way. This avoids big changes in cryptocurrencies and demand. The broker will execute trades as scheduled until the order is settled.
Here is an example of a simple iceberg order. Suppose we want to sell 2,000 bitcoins. To do this, we divide our entire volume into small orders: 200-300 BTC each.
One may have a question: what is the difference between hidden orders and iceberg orders? Basically, the former are a part of the latter.
An iceberg order consists of two parts: the visible part, which is reflected in the order book, and the invisible part, which will become visible as the order is executed.
Private traders tend to use regular stop orders because they simply don’t have the large sums of money to create panic in the market.
But the iceberg is used by those who have a lot of money. Naturally, they do not want to panic, but they can cause it.. Usually such players are institutional investors.
Iceberg orders are also used by market makers, who are charged with the function of filling the order book (stock book) with orders.
If you watch the market, you will find some of these orders, but only a fraction of them. Detecting iceberg orders of market makers in the stock market is often impossible.
Although the order book contains comprehensive information about all orders on the exchange: time, volume, price. This data is collected online.
It’s simple enough. The visible part in the order book is called the tip of the iceberg, because the rest is “under water” – hidden.
The use of icebergs for private traders is not typical, and often not available.
How iceberg bids work
Investors divide a large bid into several smaller pieces and put them on the market one by one. When they need to sell large amounts of cryptocurrency, they use iceberg bids.
By splitting their trade order into several small ones, they don’t have as visible and significant an impact on market supply and demand because they go unnoticed.
Their main goal is to execute all of their trades at the price they want.
For example, in a situation where you are selling or buying bitcoin, the very last thing you want to see is a dramatic change in price caused by a buying or selling frenzy.
But how do you identify iceberg bids? For starters, you’ll have to get a good handle on the second-level order books.
The first level books contain general information about prices, without details. The second level provides much more data and shows the depth of the market: the top 10 buy and sell prices each.
The second level order book is the one you need to use to identify the iceberg bids. This is because after the visible part of the application is executed, the next part is loaded automatically.
Study in detail the columns with prices in the trading glass. If you find an order with an identical price, it will most likely be an iceberg. The strategy is quite formulaic.
How to set up an iceberg bid
Use a platform or utility that gives you direct access to the market and order book. After that, make an account and trade larger amounts step by step.
Iceberg Bid Trading is not available on regular trading platforms. You will only be able to use such orders where direct access to markets is provided.
As a rule, such platforms are well developed technologically. For example, order books are available on platforms such as BitMEX and BitFinex.
As soon as you open an account, you can begin trading. The principle of almost all platforms is identical.
When starting to trade, when choosing an order, you do not choose a limit, market or stop order, but an iceberg.
Withdrawal
So iceberg orders are used by big players with large capitals. They are used because institutional investors do not want to cause price spikes in cryptocurrencies.
The strategy is driven by leveling out fluctuations in the market rate of the traded asset, which could potentially arise if such orders are not applied.
This material and the information in it do not constitute personal or other investment advice.
The opinions of the editorial staff do not necessarily reflect the views of the author, research portals and experts.