One reason why stock prices can rise or fall quickly is due to increased trading volume of stocks, for example. Law of supply and demandThe more shares you want, the more expensive they are. Conversely, the more shares are offered or sold. The price will decrease as well.
Therefore, it is not surprising that dealer investors with large capital often buy this instrument in small installments. This investor bookmaker action is called iceberg order. As a retail investor It is best for you to know this term. So that you can correctly determine the bookmaker’s investment strategy.
Understanding the Iceberg Order in Stock Trading
An Iceberg order is a strategy of selling or buying shares in small increments to cover the number of shares actually traded. In general, Individual investors and bookmaker companies use this strategy to prevent excessive price changes and gain maximum profits.
For example, an investment management company wants to purchase 50,000 shares (500 lots) of Share A. Of course, if this company immediately purchases 50,000 shares, the price of Share A will increase quickly because traders will place sell orders at the price of the management company. investment required
The investment management company divided 50,000 shares into 10 purchase periods of 50,000 shares each, so that the price of share A would not rise too quickly. Therefore, when managing the investment, it entered the next selling order. Prices will remain relatively low.
How does it work and determine the iceberg sequence?
To understand how the Iceberg sequence works You can look at the following example table: For example, an investment management company wants to buy 50,000 shares of Stock A and divide it into 10 purchases at different prices. The transactions that the company does are:
| Transaction number | Order quantity | Order price | Total cost |
| 1 | 5,000 | 4,300.00 rupiah | 21,500,000.00 rupiah |
| 2 | 5,000 | 4,325.00 rupiah | 21,625,000.00 Rupiah |
| 3 | 5,000 | 4,350.00 rupiah | 21,750,000.00 Rupiah |
| 4 | 5,000 | 4,375.00 rupiah | 21,875,000.00 rupiah |
| 5 | 5,000 | 4,400.00 rupiah | 22,000,000.00 rupiah |
| 6 | 5,000 | 4,420.00 rupiah | 22,100,000.00 Rupiah |
| 7 | 5,000 | 4,435.00 rupiah | 22,175,000.00 Rupiah |
| 8 | 5,000 | 4,450.00 rupiah | 22,250,000.00 Rupiah |
| 9 | 5,000 | 4,465.00 rupiah | 22,325,000.00 rupiah |
| 10 | 5,000 | 4,475.00 rupiah | 22,375,000.00 rupiah |
| all | 219,975,000.00 Indonesian Rupiah | ||
So in the first transaction The company purchases just 5,000 shares at a price of 4,300 IDR. Only when the price reaches IDR 4,325 does the company increase its ownership by another 5,000 shares, and so on until the demand for 50,000 shares is met.
So how do you determine the order of an iceberg? The way to identify iceberg orders is that you can observe the movement of the names of dealer investors who tend to repeatedly buy and sell stocks in a day. Movement of transactions of investors of this particular bookmaker. Institutional investorsYou can view this in the bookmaker history section in your trading or usage application. Application of bandarmology Especially.
After specifying the iceberg order You can enter an order at a price that is less than the price set by the bookmaker. For example, if a dealer enters an order worth IDR 4,300 per share, you can enter an order worth IDR 4,305 per share. This way, when the seller The lot requested by the dealer is not available. They will enter orders at your price level. So you can receive your shares faster.
The same is true if you want to sell stocks. So your stocks can be sold faster. You can set the selling price slightly higher or lower than the selling price set by the bookmaker. For example, if a dealer sells A shares for IDR 4,000 per share, you can set the selling price at IDR 4,050 per share or IDR 3,950 per share.
Advantages of ordering Iceberg
1. Avoid the risk of price fluctuations.
When a large number of shares are sold or bought at the same time, the price of the stock changes faster. As a result, when the same investors want to buy or sell stocks again, prices rise or fall more than expected.
The iceberg order strategy is a suitable strategy to reduce this risk. Today, many trading applications have a trading robot feature that will allow you to automatically execute the orders you enter. So you don’t have to worry if you have to buy or sell at different price levels.
2. Make the stock market liquid
This is because there is demand and/or supply at different price levels. The stock market is therefore liquid. The liquidity of the stock market will definitely be very good for the stock market, investors, and the stocks themselves. Because good stock liquidity makes it easier for other investors to buy or sell stocks.
Disadvantages of Ordering Iceberg
1. The order processing process takes longer.
For example, if you sell 50,000 shares immediately at IDR 4,300 per share, the process can be completed in just 1 hour. As a result, this iceberg trading strategy is not suitable for investors who need money quickly. Moreover, the share settlement process takes 2 to 7 business days.
2. Higher transaction costs
Buying shares in stages like the example above can increase the cost of stock transactions. For example, buying 50,000 shares at a price of IDR 4,300 at one time costs “only” IDR 215,000,000. However, because the purchase takes place in stages, The total cost therefore becomes 219,975,000.00 Indonesian Rupiah
Additionally, the implementation of the iceberg ordering strategy must be accurate. To be able to maximize profits
