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Lets say an iceberg to buy 3000 contracts. Inside bid is of 500 contracts. Placed at 1429.50...
Q1. When Someone places this order, assuming that there is no other trader is placing a bid at that price,what will be the ACTUAL bid size at 1429.50??
a. 3000 with 500 visible and 2500 hidden
b. only 500...and the next 500 will be placed (not apepeared-there is a huge difference between placing and appearing) only when the initial 500 is finished.
Q2. If for the above question, option b is correct , then lets say some one placed 700 lots mkt sell and price did tick thru 1429.25. At this moment, the iceberg will publish its next lot of 500..but since that 500 is going to be a limit order (as is true for all icebergs-they are limit orders only!)...it will not have a chance to get posted @ 1429.50..rather, it will instantly get traded at 1429.25.
What I am trying to point out by this question is, how an iceberg once broken is able to publish its subsequent lots at the previous level if there is no mkt order thrown in the meantime to re-establish that level?
As you have probably observed, you do see these icebergs broken.
So you have 500 bid @ 1429.25. Then someone puts in a 700 market sell order and you tick down momentarily to 1429.00.
What now happens is the inside offer will now be 1429.25 and inside bid 1429.00. The next 500 limit order buy will go in at 1429.25. You can put a limit order in at any level and if you put a limit order in above the inside bid, it will be matched against any limit orders on the inside offer (Ok - could be a wide spread but forget that)....
So the 500 limit order buy goes in at 1429.25, there is an offer there and 500 limit orders from the offer will be consumed. If there is more left in the iceberg, this will continue until you
1 - run out of limit buys - you end up at 1429.00 x 1429.25
2 - run out of limit sells - you end up at 1429.25 x 1429.50
Sure - in fact, when people (including me) talk about market orders being signs of an aggressor, they really mean 'actionable orders'.
Most of my trades I hit when I think (for a long) that we are about to tick up. At that point, I put a limit buy at the current inside offer. I do this because I want that price and so I will either get filled or not, what I won't get is a fill higher up.
In terms of intent, I was the aggressor because I "paid up" and accepted the worse price. Even though I put in a limit order, it was 'actionable' and is treated as a market order for Time & Sales reporting and Cumulative Delta, Footprint charts etc.
What is interesting is that with these icebergs ticking down momentarily, when they refresh again, those trades will be reported "at ask" or as a buy on the time & sales. When a market sell order hits into the iceberg, it is reported "at bid" or a sell on the time & sales.
So - same iceberg but trades reported at bid or at ask.
This is something I never really considered before and I have to thank you for that. Next time I see an iceberg 'fail' momentarily, I will keep my eye on the size of trades that hit the inside offer when it comes up - that'll give me more of an idea of the actual iceberg size.
1. By that way, you will only get to know about the size of the 'individual pieces' of the iceberg. How will you know what is the actual size without knowing how many pieces are there in total?
2. Even if you manage to find the total size of the iceberg(don't know how you are going to do that ),how will you be benefited by knowing its size ?
You only know the size of what hit into the iceberg and then it's an approximation.
So if you get down to 1429.25 and 500 contracts show but 3000 trade before it ticks up, then you figure it was at least 3000 but who knows how much else they would have added in.
if 3000 trade and it ticks down, you are a bit more sure about the max size, although it is still an approximation.
In terms of usefulness, if you are averaging 500 contracts to tick through each level and now someone steps up and absorbs 3000 contracts, it's more significant than if they step up and absorb 900 contracts.
1. Go long if you've spotted big buyers only
2. Go short if you've spotted big sellers only
3. If you've spotted big buyer and big seller simultaneously, see who is dominating the other and go along with him. If the buyer is stronger, price will see higher tops and bottoms while still within the range.... and vice versa.
And you can spot large traders by the mkt orders/limit orders or icebergs that they are placing.
