In the world of trading, there is a saying for "iceberg orders".
Iceberg orders, as the name suggests, are hidden orders, just like icebergs, we can only see a small part of the icebergs on the surface of the sea, while more icebergs are hidden under the surface of the sea, waiting for the uninformed to hit the rocks.
1. How exactly does an iceberg order work?
The reason why the iceberg order is mentioned is because it is a common technique used by institutions.
They will split a large order into several smaller orders beforehand and then show only a small portion of the order to the market. Hidden orders are iceberg orders.
For example, an institution **1000 lots** is ready to split these orders into 20 separate entries. The first 50-lot trigger** is $2,000, the second 50-lot is at $1,999, the third 50-lot is at $1,998, and so on. Among them, only the first three are displayed in the market.
Institutions do this to prevent large orders from entering the market all at once, causing huge fluctuations, and through iceberg orders, they can quietly complete the absorption.
For example, the news is bearish, and after the first few more than 50 lots of orders entered, the bears still continued to short, which led to the continuous triggering of iceberg orders. When the bears found that they had run out of chips, and there was still no way to push ** down significantly, they realized that there were long orders below, and they could only close their positions and go long with their backhands.
This is a typical seller absorption, because the multi-party has long formed a sealed order below, and has been hiding the order, no matter how the seller increases the chips, it is in vain. Once the agency achieves its goal, it can cancel the remaining iceberg orders that have not departed.
For us ordinary users, if we encounter hidden orders from institutions, because at the beginning, we will have hope for the hidden orders of the institution, but we do not know that the traps of the institution are paved layer by layer, which is very easy for us to encounter short squeezing or killing long**.
2. Identify the "hidden orders" of the institution through the order flow tool of the EBC platform
Iceberg orders will only be displayed in the market when they are triggered, and ordinary investors will naturally not be able to obtain these data. So in recent years, some high-quality platforms have launched a variety of tools to help traders identify institutional behavior. For example, I'm using the order flow tool provided by the EBC platform.
The order flow tool of the EBC platform can accurately identify the absorption behavior in the market, and help understand the long-short power comparison in the market through the delta value calculated in real time (net long - net short).
In the chart below, for example, ** is in a process of climbing, and the lows are also moving upward.
However, it can be seen from the order flow tool of the EBC platform that the delta value below has appeared many times in net long orders, indicating that the bulls are constantly attacking, but there is not much change in the **, which indicates that the buyer has been absorbed. Therefore, even if the bulls broke through the consolidation area with difficulty in the end, they still fell back quickly, indicating that the bulls ran out of chips.
But on the contrary, if it is accompanied by a positive delta increase when breaking through the consolidation range, it means that the bulls have enough strength to eat the hidden orders, and the chips accumulated in the early stage have become the driving force, which is accumulation.
Therefore, the order flow tool of the EBC platform can not only identify the "iceberg orders" of institutions, but also identify the game behavior between institutions.
In addition to this, we can also use the volume distribution in the EBC order flow tool.
In the order flow tool on the EBC platform, the volume distribution is counted for all limit and market orders. When the hidden order is triggered step by step, you will find that the chips on a certain section of ** will increase significantly, and the chips will move up or down, and you can see the price of the main intention.
Of course, it is easier to tell by the pattern of delta that resembles a hammer. As shown in the figure below, in the order flow tool of the EBC platform, the previous delta value was negative for three consecutive values, and the bears were strong, but the fourth delta closed a hammer line.
The reason for this kind of ** is that after the bears continued to probe, they hit a new low in the stage, and they wanted to further hit the bulls, but they found that they could not further promote**further**, indicating that there is a large amount of hidden long orders below, and they have to go long backhanded.
Through the order flow tool of the EBC platform, you can clearly understand the hidden order behavior of the institution.
In general, information asymmetry is the most direct reason for the differentiation of traders and institutions in trading.
The existence of these hidden orders will lead to a reversal of the direction due to the formation of closed orders. In addition to taking profit and stop loss as a means of risk management, we should also use tools to identify institutional behaviors as much as possible.
The order flow tool on the EBC platform provides us with a new perspective.