Trading 101 — Order Types: Iceberg Orders

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Trading Interface of a Financial Terminal

Iceberg orders are large size orders that will be divided into smaller limit orders in order to hide the actual large order quantity. It is usually used by institutional investors and ‘Whales’ that want to avoid tipping the market about their buy or sell decisions. This is because their decisions can influence the behavior of other traders (herding effect) due to the substantial changes it may have over market supply and demand.

Pros: Reduce price movements and herding effect for large order executions.

Cons: Can be spotted by high frequency algorithms or experienced traders and act as resistance/support levels signals for traders using technical analysis methods.

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