How Banks Hide their Orders Behind Price: a Guide on Icebergs

Yes, big banks and big financial market participants basically manipulate the markets on a daily basis because with their huge orders, they move prices. But proper market manipulation is not about hunting for stop losses or fake outs. Today we're not going to talk about price action retail stuff. Today we're going to talk about something that 90% of retail traders are not even aware of and that you can use to have an unfair informational advantage on the market. Now picture an iceberg. If you look above the surface, you don't really see much, but actually the biggest part of it is hidden below the surface. Smart money money participants are doing exactly the same thing with their orders. So they basically try to hide them under the curtains of price action and try their best to not be seenable. But what most retail don't know is that actually there's a way for you to be able to see them and take an advantage and make money from it. In this video we will discover iceberg orders and how we can actually use them to get an edge in the market. And when this video reaches a thousand likes, I'm going to make a video with all the trades that I did passing that Prof. From challenge. And we're not talking about a couple lucky trades, we're talking about hundreds of trades. So an actual edge in scalping. So ladies, buckle up and let's dive into iceberg orders. As we discussed in the previous videos of this video course, I'm making about order flow. If you didn't see the previous video, you should see them in order to understand properly what's going on here. Anyway, to summarize, there is two types of liquidity market makers which are sell limits in the ask and buy limit in the bid. This is the best ask, this is the best bid. And then there is aggressive liquidity which is aggressive buyers and aggressive sellers who are not just putting a sell limit or a buy limit in the order book, which is this part, but are physically clicking buy or sell and buying from the best asset and selling to the best bid. So say we have five contracts here and five contracts here. These are the menu of the market. These are offered contracts. So if a market buyers buys, clicks the buy button and buys one contract market, he will be executed here and this five contracts will become four. Or if someone sells, they're going to sell at the best bidder, say two contracts, this will become three. So this is the menu of the auction of the market. These instead are people who are willing to pay that a slightly worse price in order order to get filled. This would Be our footprint chart. And our candle started from here where the first contract was executed and is now here as a sell candle. If someone else comes in the market and buys six contracts, four will be executed here and two will be executed here. So this will become five and two more contracts will be executed up here. This candle will live a wick here and turn all the way to the level where the last order was executed. This is the basic of market mechanics. But as we have discussed, there is a huge variety of market participants. There are small participants, big participants and who actually moves the market most of the time is big participants like banks, institution, hedge funds, pension funds, HFTs, CPOs, CTAs, sovereign funds, university endowments, family offices, people and companies who manage wealth. And some of these market participants are called smart money participants. And since they have huge amounts of money to put in the market, they're not just going to flood the market with billions just to get filled. Not all of them at least smart money participants are going to be more efficient in the way they feel their orders. Hence they will manipulate the market to get those order filled. One of the ways is by try and hide those orders in this order book. Because if say I'm a smart money participant and I have to sell 2000 contracts here, if I put a 2000 contract sell limit on the S&P 500E mini contract, it's almost impossible that aggressive buyers will start filling this order, AKA that someone will actually come there, push the price higher, accept worse and worse prices and buy to my big order. So what I can do as a big operator is to hide my order. So I will show a very small portion of my order here like 20 contracts say. And I will not put inside the book the real order. So this is going to be the real iceberg. But what I show in the book is just the tip of the iceberg. So as the market moves until it gets up here, eating all this liquidity inside of the book. Now the book is going to get filled with new buy limits. There's always going to be more sell limits above here the footprint is going to look something like this. So currently this is the best bid, this is the best ask. And another market participant decides to buy those 20 contracts right there. So those 20 contracts are going to be executed. These contracts will disappear from the book because they've just been consumed. But as soon as those 20 contracts has been bought, they will magically pop up again. So a new part of the iceberg order is going to pop up on the book. They buy those contracts. So we reach 40 executed contracts. These will disappear, and in a matter of milliseconds, they will pop back up and so on, until the iceberg is fully consumed. And we will fill, I don't know, 800 contracts just on this level. So what we are seeing in price is silence, stillness, no movement, no information through order flow. Instead, we understand that something serious and big is going on. This is one of the things that only professionals see through order flow and that you also can see if you get yourself a data feed and a platform that can interpret this data and put it into a chart. Anyway, back to our iceberg. This is the way it works. So the iceberg is being basically a big order, which is not being shown in the book, which is constantly being reloaded and absorbing all the buying pressure that it's on the market. So what can usually happen with an iceberg order is the price will tap into that iceberg, realize it's an iceberg, sell back off a little bit, maybe try to hit that again, sell off a little bit again, and bounce on this for a couple times until it eventually breaks up. Because remember, this is basically a big sell limit, okay? So it can be a take profit of a big operator. It can be an actual sell order of someone trying to sell from that level. So it can be a big participant taking profits or entering a new sell position, or a part of a new sell position. Or it can be also the same operator exchanging contracts with itself. This can actually happen to rebalance its portfolio or to roll over to the next contract. But the very first edge that we can actually use to make money and trade this is by actually selling it with a stop above to get a couple of tick. How many ticks do we get? Do we get a huge move? I'm not going to give you all the answers. You have to do a part of the homework. Just know that a lot of times icebergs are going to fail. So you can eventually also buy the breakouts. Some icebergs instead fail momentarily, but then price start running back down. And you can see this as a liquidity grab, While actually it's something completely different. It's just a little stop run above a high or a failed auction because price failed to actually beat this operator. And that operator started also selling markets when he finished accumulating his position over here. All right, by the way, if you're one of those still asking, which platform do I use? This is probably the best platform for volume analysis in the world. And we're soon Going to release all the details to the public. We're probably going to hold a live webinar or something to present it. So you can use the email below to subscribe to the waiting list. But it's still going to take some time for us to finally release it. By the way, in this YouTube channel there is a full course on order flow. I'll leave you the playlist down below. And interviewing 2 times, 3 times World Trading Champions to share with you their insights on trading. You might want to subscribe. However, this is our chart in the S&P 500E mini contract. And if we zoom in we can start seeing the footprint chart. And here I have a first example of iceberg order. So as you can see here, every level of the footprint doesn't have a lot of contracts. We're in the London session, so we're still in the Asian session. So there is very few liquidity. But Suddenly up here, 223 contracts are executed. 119 price stays there and can' break this level. This is the first confirmation that we might have an iceberg order, a level not being broken. The poc, the POC of the candle. So the majority of the volume there a huge delta on the candle which represents a huge aggression without any results in price action. This is how we spot an iceberg. So the first sell for me would be around here. And as you can see from here, we go down pretty much a lot. By the way, if you want to backtest it, you can see this happening with your own eyes on the 19th of April in the ES contract. Then price start moving back there, a little bit of an absorption here. And then we start bouncing back down, new bounce. We try again and once more they fail. Then we try again, once more to attack this level. And when we actually attack it, more and more contracts are being absorbed. There's one more cell over here, Boom. Then we run back up here. More absorption, one more cell, more absorption, one more cell, more absorption. And 1,000 contracts are starting to be executed here. So now we realize willing to push and break that level because 1,000 contracts was never seen in every, in any one of the candles before. And as you can see, they push. They push so hard that all of their orders are creating a huge inertia in the next candle. Zero contract, zero contract. This is almost a liquidity void. And once we break such an impressive order, there's only one thing price can do which is rise up for the rest of the session. So as I said, the first edge is to sell it for as many times as price can bounce from there. The second edge you can try to find is when the iceberg gets broken. You can eventually trade the breakout, which happens a good 60, 70% of the time. By the way. Do us both a favor and subscribe to the channel. Okay. To be honest, this pattern happens kind of frequently, but not so frequently if you're a day trader. This thing doesn't happen every single day. It happens with this edge probably once or twice a month. So it doesn't often happens this way in the London session because in the London session there's few liquidity. It's an anomaly to have this big orders during the London session. That's why it has an edge mainly in the London session. 2000 contracts in the cash sessions where the New York session and the US session starts kicking in. You know, 2000 contracts can be eaten in a matter of milliseconds. It's, it's so Easy to execute 2000 contracts per level during the New York session. But if you see this anomalies in the Asian session or the London session, there's a higher chance that they're going to have a tough time trying to break that iceberg. And as if it wasn't enough, together with the developers of the software we developed an iceberg indicator that you can set up. And as you can see it shows you the iceberg from the very beginning and by the way gives you an alert if you enable it and a pop up message whenever the conditions are met. Just to make things a little easier because it doesn't happen that often. But when it happens, the edge of this pattern is great. Now I made a video about it so probably at some point the edge is going to completely decay. But, but I just launched the channel so I doubt that a lot of people are going to be seeing this and actually putting this into action. I probably have found another example of iceberg order where we were starting to absorb in this area. Evidently we see a lot of delta in these levels. And then at some point we moved that iceberg up here which that sometime can happen. And as you can see, price tries to break this level, tries again, tries again and all these bounces we can take. Big move back up. Then market tries again to break this iceberg. Can't make it. Boom. Bouncing back down, bouncing back up until it finally breaks it tests it and we go down for the rest of the session. We also test again this area. We get all the buyers absorbed. By the way, I just got a notification about this. What the hell? Let's see what's actually happening right now. No, for now, it's not a real iceberg yet. As I told you in the New York session you have to kind of mangle with the threshold of contracts because as you can see, the indicator is set on a minimum cluster of volume of 400 of 300 contracts. But three 300 contracts as a threshold for the New York session is not close to be enough. So you can just adjust it for the New York session or for the London session. So this is the kind of information that you can only see with order flow. This level of institutional activity and order flow. You simply can't see with price action this specific edge of iceberg orders. You can't see this this way with price action. So especially if you're a short term trader and a short term scalper and you're not using order flow, you might want to give it a try. There's a free course here on the channel so feel free to check it out. If you're a swing trader, granular order flow is not really useful because it's all about short term market dynamics. If you're an intraday trader, some say that it's just noise, but I completely disagree. You just have to know what you are looking for in the professional trading floors. If Navinder Sarao was using this kind of tool and so many traders I have met in my journey and also for intraday trading, it can give you some really nice insights and more objective and reliable confirmations for entries, then you can be profitable with everything. You can be profitable with price action, you can be profitable with trend lines with macros. Order flow. What it has done to me is making things more clear, more objective, which is a problem that a lot of people have. And if I were to get back to normal price action now, I would feel completely shortsighted. So for me order flow is literally like putting X ray glasses and see the anatomy and the physiology of price movements. So it can be really useful also for intraday traders and most retail don't watch this stuff stuff. So if you will start to backtest these concepts, let me know in the comments if you find an edge in iceberg orders. If you want to have this platform and this indicator, leave your email in the waiting list down below. We will probably launch it in a couple months or so. If you enjoyed this video, remember to click a like and subscribe to the channel. If you want to see the next videos about order flow and all the podcasts and interview, I'm making on this channel. I'll see you in the next video. Ciao.