Explain the Concept of 'Iceberg Orders' and Their Effect on Perceived Liquidity ▴ Learn

Explain the Concept of ‘Iceberg Orders’ and Their Effect on Perceived Liquidity.

An iceberg order is a large limit order that is split into smaller, visible limit orders (the 'tip') and a large, hidden portion (the 'iceberg'). Only the tip is visible on the order book.

They are used by large traders to conceal their true order size and avoid front-running. They make the order book appear less liquid than it actually is, as the hidden volume is not factored into the visible depth.

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