An iceberg order is a type of order used to execute a large trading intent by displaying only a small portion (the tip) in the public order book, while the remainder is held in reserve. The visible portion is replenished with additional quantity as the original tip is filled, up to the total order size.
The trader specifies two quantities: the total size of the order and the visible size. The venue reveals the visible size in the order book; when that portion is executed, another portion becomes visible, and so on, until the full quantity is completed or the order is canceled. Iceberg behavior can be fixed (constant visible size) or dynamic, and some venues provide dedicated iceberg order types.
The goal is to minimize market impact and reduce signaling to other market participants. By limiting the publicly visible quantity, a participant can participate in price discovery and liquidity while avoiding a large, abrupt display in the book. Iceberg orders are common in highly liquid markets and can be managed by the client or the exchange.
The effectiveness depends on liquidity and market depth. If depth is shallow, there may be limited execution of the hidden portion. Some venues impose limits on visibility, disclose behavior, or charge different fees. Traders should understand how an iceberg order interacts with the broader order flow and liquidity before use.
A trading desk configures an iceberg order with a total size of 1,000,000 shares and a visible size of 50,000 shares; as the 50,000-share tip is filled, additional portions are revealed until the full 1,000,000 shares are executed.
Order book · Hidden order · Reserve size · Market depth · Liquidity · Algorithmic trading