What is the Iceberg Strategy
Iceberg strategies are commonly used to handle a large number of buy and sell orders by splitting large orders into multiple smaller ones for batch trading, in order to control market impact, conceal trading intentions, and prevent significant fluctuations in market prices.
Noun Explanation
1. Order price is better than the Order Book
1.1 Definition: 1.1.1 Order price is better than the Order Book: Traders set the order price based on liquidity, using 'price distance' and 'ratio'. 1.1.2 Price distance: Traders place small buy orders by setting the order price a certain price distance below the Ask price, or place small sell orders by setting the order price a certain price distance above the Bid price, with the maximum price distance being '1% of the current order book'. For example, in a sell scenario, at the beginning of the strategy, the user selects the order price a certain price distance above the Ask price to place a small sell order. For instance, if the Ask price is 20000 and the price distance is 5U, then the placed order price would be 20005U, waiting for the sell. 1.1.3 Ratio: Traders place small buy orders by setting the order price a certain ratio below the Ask price, or place small sell orders by setting the order price a certain ratio above the Bid price. The maximum ratio for BTC and ETH is 0.2%, while for other currencies, it is 0.5%. For example, in a sell scenario, at the beginning of the strategy, the user selects the order price a certain ratio above the Ask price to place a small sell order. For instance, if the Ask price is 20000 and the ratio is 0.1%, then the placed order would be 20000 X (1+0.1%) = 20020U, waiting for the sell.
1.2 Formulas: 1.2.1 Buy Formula: When buying, the order price = Ask price X (1-ratio) or the order price = Ask price - price distance 1.2.2 Sell Formula: When selling, the order price = Bid price X (1+ratio) or the order price = Bid price + price distance
2. Activation Price
The activation price is used to activate the Iceberg strategy. When buying: Market price ≤ Activation price, the order is activated. When selling: Market price ≥ Activation price, the order is activated. Taking buying as an example, when the market price is lower than the 'Activation Price,' the strategy starts to place small buy orders using the buy-one price down a certain price distance/proportion as the entrustment price. Note that when the activation price is too far from the current price, it may cause the strategy not to trigger in time, so it is important to set the appropriate activation price.
3. Single Amount
Single amount is used to determine the 'order quantity' for each small order. The system will set a random ratio for the single amount to increase the concealment of user trading strategies.
Formula: Order quantity for small orders = Single amount X Random ratio
Note: The random ratio ranges from (0.5 - 1).
4. Total Entrustment
The total amount of entrustment set by the user on the page needs to be split into multiple small orders in the iceberg strategy, continuously entrusting them until the total amount is completely filled, at which point the strategy ends.
How to use Iceberg Strategy
1. Placing an Order
On the WEB end of spot or isolated margin trading, select the 'Iceberg Strategy' in the 'Strategy Order Entry', take spot BTC/USDT as an example, input the total order quantity, single quantity, trigger price, order price better than the order book, and click [Confirm Buy].
2. Stop Strategy
Click on [Current Orders] - Select the Iceberg strategy you want to stop, and click [Cancel Order].
Examples
Buy example:
Direction: Buy Current price: $20,000 Trigger price: $18,000 Order price is better than the order book: 0.2% Total order quantity: 10 BTC Single order quantity: 1 BTC
Order price: Buy one price (1-0.2%) Single order quantity: 1BTC * random ratio, assuming the random ratio is 0.8, then the small order quantity is 0.8BTC Trigger order: When the market price drops to 18000, trigger the iceberg buy strategy.
First order: Assuming the buy price is 18000, the buy order price is 17964, and the order quantity is 0.8BTC. Second order: After the 0.8BTC is completely filled, the second order begins, with an order quantity of 1BTC X a random ratio (0.5,1), and the order price is the latest buy price X (1-0.2%). ... Continue this process until the Nth order, when the total order quantity is completely filled, the strategy will terminate.
Sell example:
Direction: Sell Current price: $20,000 Trigger price: $21,000 Order price better than the order book: 5 USDT .2% of the total order quantity: 10 BTC Single order quantity: 1BTC
Order price: Sell one price +5USDT Single order quantity: 1BTC X random ratio, assuming the random ratio is 0.8, then the small order quantity is 0.8BTC Trigger order: When the market price rises to 21,000, trigger the Iceberg sell strategy.
First order: Assuming the selling price is 21,000, the selling order price is 21005, and the order is 0.8 BTC. Second order: After 0.8 BTC is completely traded, the second order begins, with the order quantity of 1 BTC X random ratio (0.5,1), and the order price is the latest selling price + 5 USDT. ... Until the Nth order, when the total order quantity is completely traded, the strategy is terminated.
FAQ
1. How to set the order price higher than the Order Book
If you want to execute orders more quickly, the ratio can be set to 0.01%, and the open order price for buying is the buy-one price X (1-0.01%), and the open order price for selling is the buy-one price X (1+0.01%). The closer to the order book, the faster the transaction; If you want to trade at a more favorable price, BTC and ETH can be set to 0.2%, and other currencies can be set to 0.5%. The open order price for buying is the buy-one price X (1-0.2%), and the open order price for selling is the buy-one price X (1+0.2%). Buy lower, sell higher.
2. How to set the quantity per order
The quantity of each small order entrustment = single quantity X random ratio (0.5,1), the larger the single quantity entrustment, the larger the entrustment of each small order, the harder to deal; the smaller the setting, the easier it is to be eaten by the opposite disk, and the easier it is to deal.
3. What is the difference between 'Iceberg Strategy' and 'Iceberg Order' of limit order?
In the Iceberg strategy, the main purpose is to split large orders at a better price. Users can set price distance or slippage ratio, trigger price, single quantity, and other customized settings. Users can easily and quickly complete customized settings according to their own needs, in order to achieve a better price than the market price.
4. What's the difference between Iceberg strategy and time-based entrustment? How to choose?
4.1 Similarities and Differences Between Iceberg Strategy and Time-sharing Entrustment:
The purpose of the transaction is different: the iceberg strategy is mainly to trade at a better price and lower cost, so the transaction price of the small orders of the iceberg strategy is better than the first price of the handicap at the time of setting; The main purpose of time-sharing orders is to split large orders faster, so the transaction price of small orders is inferior to the first price of the order at the time of setting. Different price settings: The order price of the iceberg strategy is set according to the slippage or proportion of the local price. The order price of time-sharing orders is set according to the slippage or proportion of the counterparty's order price. The execution method of small orders is different: the iceberg strategy is that the next order will be executed immediately after the small order is fully filled, while the time-sharing order is executed according to the "time interval", regardless of whether the order is fully filled, after the time interval is reached, the order will be cancelled and re-ordered.
4.2 How to Choose Iceberg Strategy and Time-weighted Order
The choice between Iceberg Order and Time-based Order depends on the trading goals and market strategies of traders or institutions. If you want to trade at a relatively slow pace for better prices, then Iceberg Order may be more suitable. If you want to achieve an average cost over a period of time while also pursuing speed of execution, then Time-based Order may be more suitable. In practice, you can also combine both strategies for trading, depending on your trading strategy and market conditions.
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