An Iceberg Order is a large single order that has been divided into smaller lots, usually through the use of an algorithmic program, for the purpose of hiding the actual order quantity. This order type is often used by a large institutional traders.

Synthetic Orders can be best described as orders that are generated from a computer algorithm. The most commonly used synthetic order would be an Iceberg Order. This is best used by a trader looking to put a very large order into the market but looking to be discreet about it. An example would be, trying to buy 1,000 ES contracts at a certain price but only showing that you want 100. As soon as that 100 is filled, another 100 will appear and continue to do this in succession until filled.

Other synthetic order types include TWAP (Time Weighted Average Price) also known as a Time Slice order and VWAP (Volume Weighted Average Price). The TWAP execution is a set of orders being executed over a period of specified time at the closest average price for that period. These orders can be passive and they can be aggressive depending on the situation. Also, similar to an Iceberg order, the order only shows a certain amount of contracts to execute and keeps reloading that number by each specified time period. This can be spread out across an entire trading session. An example would be a large trader putting significant capital to work in the market or taking significant capital out of the market while looking to not disturb that particular market’s price and again, being discreet. Same for VWAP but this is measured against the market’s volume but accomplishes the same thing.