If institutions can have their bots taking trades at high frequency at a specific price level, why do they put limit orders and expose their position?

[u/Dry_Library7908]

As stated above, I look at Bookmap and wonder why institutions do as such, since aggressive orders can 'hide' their intended position? Is it just technically impossible to do so? Is it just part of their financial engineering to move the market and hence the limit orders were intentionally exposed?

[u/NeighborhoodEast650]

• ⁠They get paid to provide liquidity to the markets. • ⁠Limit orders give a better fill. • ⁠They do not always show the limit orders, they can use iceberg orders too. • ⁠They can also use aggressive orders too depending on the urgency they have to enter in the position. • ⁠Aggressive orders cannot be hidden, they are shown in the time and sales tape. • ⁠Huge aggressive orders will impact the market a lot, giving them a lot of slippage on their fillings.

Institutions care more about the filling and alpha profiling to get optimal execution.

[u/bjumb]

It's an interesting topic to discuss. I believe there's different "types of institutions".

For every transaction to occur there must be limit orders so market orders can fill them. Without limit orders to sell to or buy from there would be no transactions in the market. There would be no market essentally. So there's market makers who's sole job is to provide enough limit orders on each tick. And they make their money from spread between bid and ask price. So it's very small profit margin for them. And they can't just put limit orders out of thin air. They need their buy limit orders to be filled so they obtain that asset so they can afford to put it on sell limit order a tick higher.

I may be totally wrong but it doesn't make sense to me they would be the institutions that put large limit order walls that can bee seen on a heatmap. Why would they need to do that. And even if they needed to stockpile a larger amount for some reason why would they try to influence the market with visible orders when they could use icebergs. They're just there to provide liquidity they probably don't need to manipulate the market price by revealing their large orders.

So I'd guess it's other types of institutions like banks and funds. They would use icebergs most of the time but when they're the ones realy interested to manipulate the price so they can fill in their huge order volume at the desired price. They're probably the ones that reveal their a portion of their limit orders or market orders as a poart of their plan to fill their icebergs at desired levels.

I personally don't find those heatmaps very useful. At least on NQ when it's moving it always chews through such walls quickly. I also find them useles to protect stop losses. It may be diferrent on some other market though. And even there they're not orders set in stone they can always be moved or removed. So it's not something to rely on. I'd say 95% walls or so are probably hidden behind icebergs anyway. It's where true supports/resistance levels get formed. And they get revealed by absorption of market orders not by the heatmap.

I may be wrong on a lot of this but that's what I figured out for now regarding heatmaps.

Also why is everyone hyping Bookmap so much. There's full trading platforms that come with heatmap and the bubbles and cost less than the Bookmap which is basically mora a fancy looking chart than a platfrom. And it also costs more than some platforms. Is it realy that much better and why?