Imagine you want to buy 1 million shares of a company. If the market detects a large order, it might cause the stock price to spike, influencing investor behavior and potentially driving the price higher than desired.
So, what can you do if don’t want the market to see such a large order?
That’s where Iceberg Orders come in. This unique feature ensures your large trades remain discreet, enhancing execution efficiency while maintaining your market strategy.
On Dhan, Iceberg Orders are designed to simplify trading and improve control. Whether you’re a seasoned trader or just starting, understanding and using this feature can take your trading experience to the next level.
What is Iceberg Order?
An Iceberg Order divides a large trade into smaller parts, executing them sequentially to avoid revealing the entire order to the market. Like an iceberg, only a small portion of the total order is visible in the market depth.
For example, if you’re buying 30,000 shares of Tata Motors, you can split it into six parts of 5,000 shares each. The exchange will display only 5,000 shares at a time, keeping your strategy discreet while completing the full order.
It also helps reduce the impact cost. But what is that? Let’s understand.
What is Impact Cost?
Impact cost is the difference between the actual traded price and the instrument’s price at the time the order was placed.
For example, if a market order to buy 1,200 shares was placed when the stock was trading at ₹150, and the actual execution price was ₹151, then the impact cost would be ₹1 x 1,200 = ₹1,200.
Similarly, if a limit order to buy 1,200 shares was placed at ₹150 when the stock was trading at ₹150 and later modified to ₹150.4 to execute, then ₹0.4 x 1,200 = ₹480 would technically represent the impact cost.
As the order size increases, the impact cost also rises. Traders handling large orders tend to lose significantly more to impact costs compared to other charges like STT, brokerage, or exchange transaction fees.
How Does this Feature Help?
Iceberg Orders provide several benefits for traders:
- Better Price Execution: Splitting orders minimizes market impact, helping you achieve more favorable prices.
- Simplified Large Trades: Handling significant quantities becomes manageable and efficient without manual adjustments.
- Auto-Adjust for Freeze Limits: For Options Traders, Dhan’s Iceberg Orders automatically adjust for quantity and freeze limits, ensuring smooth execution.
- Instant Orders: Time-priority execution ensures your orders are placed promptly on exchanges.
- Automatic Slicing and Exiting: With Dhan, large position exits are seamlessly managed through automated slicing, saving time and effort.
How to Use this Feature?
Using Iceberg Orders on Dhan is straightforward:
- Choose the stock you want to buy.
- Select Buy or Sell.
- Enter the Quantity and Price.
- Choose Market or Limit order type.
- Tick the “Slice as Iceberg” Option.
- Specify the Number of Legs (up to 99 trades).
- Click on Buy or Sell to execute.
Note: For Equity, the quantity must exceed 100 or have a total value of over INR 25,000. For Futures & Options, a minimum of 5 lots is required.
Conclusion
Iceberg Orders on Dhan empower traders with enhanced control, discretion, and efficiency when managing large trades. By splitting orders into smaller, more manageable parts, you gain the flexibility to execute trades seamlessly.
Try Iceberg Orders on Dhan today and experience the difference in trading smarter and faster.
