Published Sep 16, 2024
An Iceberg Order is a type of large order designed to hide the full size of the order from the market. It splits the order into smaller, visible parts (the “tip” of the iceberg), while the rest of the order remains hidden. This reduces market impact and prevents alarming other traders, which might lead to unfavorable price movements.
Iceberg orders help address key challenges in trading large quantities, such as impact cost and freeze quantity:
Impact Cost:
Impact cost refers to the difference between the expected trade price (at order placement) and the actual execution price. It increases with the size of the order, as larger trades tend to move the market price more significantly. For high-volume traders, this cost can often exceed other fees, such as brokerage, Securities Transaction Tax (STT), or exchange charges.
Example: If you place a market order to buy 1,000 shares at ₹100, but the trade executes at ₹100.5, the impact cost is calculated as:
(₹100.5−₹100)×1,000=₹500(₹100.5 – ₹100) × 1,000 = ₹500
Freeze Quantity:
Exchanges impose a freeze limit, which is the maximum number of contracts allowed in a single equity derivative order. Traders placing large orders often need to split them into multiple smaller ones, which can be inconvenient.
Iceberg Orders address this by allowing large trades, such as 10,000 contracts (or 200 Nifty lots), to be executed in smaller tranches while appearing as one order. This reduces the need for multiple entries, helps lower impact costs, and streamlines the process for large trades.
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To place Iceberg orders via Stocko App, kindly follow below steps:-
1 – Login Stocko App
2 – Open Buy/Sell window from the Market Watch Script
3 – Open Buy/Sell window
4 – Select Iceberg >> Enter the required quantity, price, and trigger price >> Specify the number of legs >> Place the order
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