What is Tick Trading? Understand Tick Sizes in NSE
Trading isn’t what it used to be. Brokers no longer shout prices on the floor, scribble trades on slips, or confirm deals with a handshake. In the past, if you visited the Bombay Stock Exchange (BSE) building in Mumbai, you would see traders huddled in circles, shouting bids and ringing bells for every transaction. That scene marked the beginning of tick trading in share market— not in the electronic sense, but as live price movements (or ticks) that traders shouted, recorded, and executed in real time.
Today, tick trading operates in a digital space — precise, lightning-fast, and driven by algorithms. But what exactly is tick trading in share market, and why has it become a buzzword in modern markets? Let’s break it down.
What is a Tick Size and How it started in India?
A tick refers to the smallest possible price movement of an asset in the live market. It represents the minimum increment or decrement by which a stock’s price can move, either upward or downward. For example, if a stock’s price changes from ₹10.25 to ₹10.30, the tick size is ₹0.05.
In the 1980s and early ’90s, tick trading in Indian share market didn’t rely on electronics. Brokers on BSE’s iconic trading floor used hand signals and shouted bids to capture even the tiniest price changes. They manually recorded every tick on trade slips and sent them to back offices through runners. The environment was chaotic and fast-paced, where success depended on spotting the right tick faster than anyone else. That was real-time, human-powered tick trading.
Example of Tick Size
To better understand tick size, consider a stock with a tick size of ₹0.10. If the stock is currently priced at ₹500, the next possible price movements are ₹500.10 or ₹499.90. This means that the slightest change in price a trader can capitalise on is ₹0.10.
For example, suppose a trader bought 1,000 shares at a price of ₹500.00, and if afterwards the price increases to ₹500.10, the profit per share is ₹0.10, which is a total profit of ₹100 (₹0.10 × 1,000 shares). This is a small profit, but as we highlighted above, a tick trader can conduct many trades like this throughout the day. Even though only small price movements are made, with increased share size, the trader can add to the number of trades conducted, and therefore, the total profits made. This also shows how understanding and using tick size is important to this particular trading style.
If you are new to stock markets, the first step is to open free demat account so you can participate in tick-based trading and other market strategies seamlessly.
Characteristics of Tick Size
Tick size is the smallest price movement of a trading asset, established by the relevant exchange of the security. Tick sizes vary based on the asset class being traded (stock, futures contract, or commodity). Smaller tick sizes usually increase market liquidity and create more trading opportunities, but they can also lead to higher price volatility. Larger tick sizes reduce noise and clarify price movement. Tick size is a component of market efficiency because it affects the bid-ask spread and the depth of the market to protect fair and uniform trading.
What is Tick Trading?
Tick trading is a high-frequency trading strategy that executes trades based on individual price ticks — the smallest possible price movements defined by the exchange. Rather than relying on time-based intervals like 1-minute or 5-minute charts, tick traders analyze tick data, examining each individual price change to uncover ultra-short-term trading opportunities.
In tick trading, each tick reflects a single trade or price change. Traders use tick charts — such as 100-tick or 500-tick charts — to spot patterns that standard candlestick or time-based charts often miss. These charts generate a new bar after a set number of trades (ticks), not after a fixed time period.
Tick traders typically deploy algorithmic or automated trading systems to take advantage of micro price movements. They program these systems to respond to specific triggers such as recurring patterns, order book imbalances, volume spikes, or latency arbitrage opportunities — all within milliseconds.
This trading style requires low-latency execution, direct market access (DMA), real-time tick data feeds, and advanced technical indicators specifically designed for tick-level analysis. Due to the extremely short holding periods and the high volume of trades, tick trading is typically employed by scalpers, proprietary trading firms, and high-frequency trading (HFT) desks.
How Does Tick Trading Work?
Tick trading involves buying and selling stocks (or other assets) based on small price movements, known as “ticks.” Instead of waiting for large price swings or long-term trends, traders target tiny price changes to make quick decisions.
For example, suppose Tata Power shares are trading at ₹390. If the price increases by ₹0.05 to ₹390.05, that movement counts as one tick. Tick traders act on these small changes, aiming to profit from each minor shift rather than waiting for larger moves.
Modern traders use algorithmic trading software and real-time data to monitor these fluctuations. They often execute dozens or even hundreds of trades each day. Their goal isn’t to ride major market trends but to capture small, rapid profits from frequent price movements.
Why Tick Size Matters for Day Traders?
Tick size is a fundamental component of market microstructure that directly impacts trading strategies, execution quality, and overall market liquidity. Understanding its role is essential for day traders aiming to optimize performance and reduce costs.
1. Price Precision and Spread Efficiency
Tick size defines the minimum allowable price increment between two bids or offers. A smaller tick size allows for finer price gradations, leading to tighter bid-ask spreads. This generally results in better execution prices for both retail traders and market makers. Conversely, a larger tick size may widen spreads but reduce market noise by limiting excessive order fragmentation.
2. Liquidity and Order Book Structure
Tick size significantly influences the depth and distribution of the order book. An optimally set tick size helps maintain a balanced book, concentrating liquidity at key price levels. If the tick size is too small, liquidity may fragment across many price points, increasing volatility and decreasing the likelihood of order fulfillment at favorable prices.
3. Algorithmic & High-Frequency Trading (HFT)
In algorithmic and HFT strategies, tick size determines the granularity of price signals. It affects the design and effectiveness of scalping tactics, latency arbitrage, and other tick-dependent models. Even minor adjustments in tick size can significantly impact strategy viability, especially for systems that rely on ultra-fast execution and micro-price movements.
4. Market Fairness & Manipulation Prevention
Regulatory bodies use tick size to promote fairness in the market. By enforcing a minimum price increment, they can reduce manipulative practices like quote stuffing and sub-pennying. This regulation helps maintain a more orderly order book and limits the ability of certain participants to “step ahead” with imperceptible price improvements.
5. Transaction Costs & Slippage
For active traders, tick size directly influences transaction costs. Larger tick sizes can increase slippage in volatile or thinly traded markets. In contrast, smaller tick sizes allow for more precise order placement, potentially reducing slippage and improving execution accuracy.
Tick Trading in the Indian Context
Tick trading in share market gained significant traction after 2000 with the introduction of electronic trading platforms like NSE NOW, ODIN, and later, mobile-based terminals. Today, traders can utilize algorithmic trading platform and broker-provided APIs to code and deploy tick-based strategies in real time.
In the Indian share market, popular instruments for tick trading include Nifty futures, Bank Nifty options, and highly liquid stocks such as Reliance Industries, HDFC Bank, and TCS. Brokers that provide APIs and low-latency terminals offer a considerable advantage, enabling tick traders to execute strategies with speed and precision.
Revised Tick Sizes for Stocks and Their Futures
| Security Price (₹) | Previous Tick Size (₹) | Revised Tick Size (₹) |
|---|---|---|
| Below 250 | 0.01 | 0.01 (Unchanged) |
| 250 – 1,000 | 0.05 | 0.05 (Unchanged) |
| 1,000 – 5,000 | 0.05 | 0.10 |
| 5,000 – 10,000 | 0.05 | 0.50 |
| 10,000 – 20,000 | 0.05 | 1.00 |
| Above 20,000 | 0.05 | 5.00 |
The revised tick size for stocks and futures now varies by price range. It remains unchanged at ₹0.01 for securities below ₹250 and ₹0.05 for those between ₹250 and ₹1,000. For securities priced ₹1,000–₹5,000, the tick size increases to ₹0.10, and for ₹5,000–₹10,000, it rises to ₹0.50. Stocks in the ₹10,000–₹20,000 range now carry a tick size of ₹1.00, while those above ₹20,000 move to ₹5.00.
Revised Tick Sizes for Indices and Their Futures
| Index Level | Previous Tick Size (₹) | Revised Tick Size (₹) |
|---|---|---|
| 0 – 15,000 | 0.05 | 0.05 (Unchanged) |
| 15,000 – 30,000 | 0.05 | 0.10 |
| Above 30,000 | 0.05 | 0.20 |
The revised tick sizes for indices and their futures now depend on the index level. For indices ranging from 0 to 15,000, the tick size remains unchanged at ₹0.05. However, for index levels between 15,000 and 30,000, the tick size has increased from ₹0.05 to ₹0.10. For indices above 30,000, the tick size has been revised significantly to ₹0.20.
Key Components of Tick Trading
1. High-Speed Internet Connectivity
Tick trading operates on razor-thin margins, where every millisecond can impact profitability. A stable, high-bandwidth internet connection is crucial to avoid lags and ensure real-time responsiveness.
2. Real-Time Market Data Feeds
Access to accurate, low-latency data feeds from platforms like TradingView or your broker’s terminal is essential. Timely data helps traders pinpoint precise entry and exit points, especially in volatile market conditions.
3. Low-Latency Trading Platforms
Execution platforms optimized for speed are key to success in tick trading. The lower the latency between order placement and execution, the better your chances of capitalizing on micro-price movements.
4. Cost-Efficient Brokerage Structure
Since tick trading involves high-frequency trades, even small commissions can erode profits. It’s important to choose brokers with minimal spreads and low or zero per-trade costs to maintain profitability.
5. Strict Discipline and Strategy
Tick trading is not gambling; it’s a calculated approach that requires strict adherence to rules, strategies, and emotional control. Consistency and discipline are what separate successful traders from speculative players.
Advantages of Tick Trading
- Tick trading allows traders to benefit from extremely small movements in price, which means that even a very small change in the market can become potentially lucrative.
- The quick execution of trades enables multiple transactions within a single day, increasing earning opportunities.
- The use of ticks provides liquidity for markets as it instantly creates buyers and sellers, resulting in better overall price movement.
- It offers high flexibility as traders can participate across various markets, including stocks, commodities, and futures.
- Trading small amounts can have strict stop-loss orders that limit risk effectively.
Overall, it provides a precise way to capitalise on short-term market fluctuations efficiently.
Tick Trading Strategies
Traders employ many techniques in tick trading to earn money through exploiting small price movements. Scalping or entering and exiting trades very rapidly to earn a small profit on every trade. Another popular technique is momentum trading, where traders follow strong price trends by taking positions in the same direction, aiming to profit as the trend continues.
Many traders also use algorithmic trading, which entails using computer programs to transact based on predefined rules automatically. Traders should use a pre-defined risk-reward ratio for their trades. It’s important for a trader to decide on the amount of loss they are willing to withstand, as well as the potential profit they intend to gain from every tick. To trade effectively, discipline and consistency are essential for achieving success.
Challenges of Tick Trading
Tick trading offers distinct opportunities, but also specific challenges that require thoughtful planning. Because tick trading is based on many trades, brokerage and tax costs can add up, requiring you to manage your expenses. Assuming that any trader will achieve success in tick trading, they will need effective technology, a reliable internet connection, and an advanced toolkit to actively and quickly react to price movements. Additionally, small tick values or movements create market noise, making it difficult to focus on and identify relevant trends.
Difference between Tick Size and Tick Value?
| Term | Meaning | Example |
|---|---|---|
| Tick Size | The smallest unit by which the price of a stock or commodity can change. | If tick size is ₹0.05, a stock priced at ₹200 can move only to ₹200.05 or ₹199.95. |
| Tick Value | The actual money value gained or lost for each tick movement, based on how many units are traded. | If a trader holds 100 shares and price rises by one tick of ₹0.05, the tick value is ₹5 (100 × 0.05). |
This distinction is important because tick size refers to the minimum price movement, whereas tick value represents the monetary impact of that movement.
Conclusion
Tick trading illustrates how even the smallest price movements can become part of trading opportunities with careful planning, speed, and discipline. Tick trading has a great deal of potential in terms of providing quick gains, but requires risk management and reliable trading instruments. If you’re interested in learning or starting your trading journey, Findoc is a reputable source to help you on your journey to trade efficiently and confidently.
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FAQs on Tick Trading
Stock exchanges determine tick sizes based on the price range of the security. For example, NSE has a uniform tick size of ₹0.05 for all stocks, except for certain instruments where it may differ.
Tick-by-tick trading refers to analyzing or executing trades based on each individual price movement (tick). It is commonly used in high-frequency trading (HFT) and algo trading strategies that require granular market data.
Tick data is the raw market data that records every change in price, bid, ask, and volume, with timestamps. It is much more detailed than minute or hourly data and is used for backtesting and HFT models.
Tick data captures every individual price change, offering ultra-granular detail. In contrast, candlestick data aggregates price movements into open, high, low, and close (OHLC) values over fixed time intervals such as 1 minute, 5 minutes, or more.
Tick trading allows traders to benefit from small price movements that happen often. It offers quick profit opportunities, high liquidity, and flexibility across different markets like stocks, commodities, or futures. However, proper tools and planning are needed.
Yes, beginners can try tick trading, but it is risky and requires practice. They should first understand terms like tick size, use demo accounts, and learn risk management before trading with real money.
A tick chart is a type of chart that shows price changes based on the number of trades, not time. It helps traders see short-term patterns and identify quick entry or exit opportunities.
Tick traders use fast trading platforms, tick charts, technical indicators, and high-speed internet. Some also use algorithmic tools that place orders automatically, helping them respond to market movements within seconds.
Still have questions? If you need more information or have specific questions, feel free to reach out. We’re happy to help you find the answers you’re looking for.