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.
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.
FAQs on Tick Trading
a. How is tick size determined?
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.
b. What is tick-by-tick trading?
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.
c. What is tick 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.
d. How is tick data different from candlestick data?
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.
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.