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Tick size is the smallest possible price fluctuation in an asset. The tick size, or the tick value, is worth a specific amount of money. It varies from one kind of asset to another. Tick size can also be defined as the minimum price movement of a trading asset. The price can move up or down on the exchange, but it always moves in tick-size increments.
Note: "Tick Size," the minimum permitted price step, is entirely distinct from "Tick-by-Tick (TBT) Data," which refers to the live, sequential feed of individual market trades used by institutional algorithms.
This article explains what tick size means, how it works, and why it matters when trading.
Key Takeaways
- Tick size is the minimum permitted price movement of a security or contract.
- The price of a security can move only in multiples of its applicable tick size.
- Tick size can differ across securities and market segments.
- In India's equity market, the applicable tick size can depend on the security's price.
- Tick size is different from lot size, which determines the quantity of securities in an order or contract.
- A smaller tick size can allow finer price increments, while a larger tick size creates wider price steps.
What is Tick Size?
Tick size refers to the smallest price increment by which the price of a traded security can change.
For example, if a stock has a tick size of ₹0.05, its price can move from ₹100 to ₹100.05, then ₹100.10, and so on. An order cannot be placed at ₹100.03 because that price does not fall within the permitted price increments.
The exact tick size applicable to a security is determined according to exchange rules. BSE, for instance, defines tick size as the minimum difference in rates between two orders on the same side of the market.
How Does Tick Size Work?
Suppose a stock has a tick size of ₹0.05 and is currently trading at ₹250.
The permitted prices could include:
- ₹249.90
- ₹249.95
- ₹250.00
- ₹250.05
- ₹250.10
A trader cannot submit an order at ₹250.03 because it falls between two permitted price points.
This applies to both sides of the order book. Buyers and sellers must place their orders at prices that follow the applicable tick-size rule.
This is important because the stock market does not allow prices to change in fully unrestricted decimal places. The tick size provides a standardized structure for price discovery and order matching.
Tick Size in Stock Market
Tick sizes are not necessarily the same for every security.
For example, NSE revised the tick-size structure for securities in its capital market segment in 2025. Under the applicable framework, securities priced below ₹250 have a tick size of ₹0.01. For securities priced from ₹250 to ₹1,000, the tick size is ₹0.05. Above ₹1,000, the applicable tick size increases in slabs.
The current framework includes the following slabs for eligible securities:
| Security Price | Tick Size |
| Below ₹250 | ₹0.01 |
| ₹250 to ₹1,000 | ₹0.05 |
| Above ₹1,000 to ₹5,000 | ₹0.10 |
| Above ₹5,000 to ₹10,000 | ₹0.50 |
| Above ₹10,000 to ₹20,000 | ₹1 |
| Above ₹20,000 | ₹5 |
The exchange periodically reviews tick sizes, so traders should check the latest exchange specifications rather than assume that a single tick size applies permanently to a security.
Different market segments can also have different tick-size structures. For example, exchange-traded derivatives and commodities may follow their own specifications.
Tick Sizes in Derivatives Segments
Different market segments follow separate structural schedules. For instance, equity derivatives and index futures often use distinct frameworks, such as index futures utilizing dynamic tick increments corresponding to underlying index levels, while most stock options contracts maintain a standardized tick size of ₹0.05 regardless of their contract premium.
Why is Tick Size Important?
At first glance, a difference of ₹0.01 or ₹0.05 may seem insignificant. But when thousands of orders are being placed, these small increments become part of the market's order structure.
It Affects Order Prices
The most direct impact is on the price at which you can place an order. This matters particularly to traders who try to enter or exit at very specific prices.
It Influences the Bid-Ask Spread
The bid price is the highest price a buyer is willing to pay, while the ask price is the lowest price at which a seller is willing to sell. Tick size determines the price increments available between these orders.
A smaller tick size can allow market participants to quote prices more closely, although the actual bid-ask spread also depends on liquidity, demand, and supply.
It Affects Price Precision
A smaller tick size gives traders more price points between two levels.
This difference can matter more when trading securities where small price movements represent a meaningful portion of the expected return.
Are Tick Size and Bid-Ask Spread Related?
Tick size and bid-ask spread are related, but they are not the same thing. Tick size tells you the smallest permitted price movement.
The bid-ask spread is the difference between the best available buy and sell prices.
In a highly liquid stock, buyers and sellers may compete closely, resulting in a relatively narrow spread. In a less-liquid security, the spread can widen even though the tick size remains unchanged.
Does Tick Size Affect Profit and Loss?
Tick size does not directly determine whether a trade is profitable. Your profit or loss depends on the difference between your entry and exit price and the quantity traded.
However, tick size determines the smallest price movement that can contribute to that profit or loss.
Why Do Exchanges Have Tick Sizes?
Without a standard price increment, the order book could become unnecessarily fragmented.
Imagine buyers placing orders at:
- ₹100.001
- ₹100.002
- ₹100.003
- ₹100.004
and sellers doing the same.
A defined tick size creates a common structure for price quotes and order matching.
It also provides a balance between price precision and market efficiency. A very small tick size allows traders to quote prices more precisely, while a larger tick size reduces the number of possible price points.
What Happens When a Stock's Price Changes?
An interesting point about tick size is that the applicable tick size can change when a security moves into another price slab, depending on the exchange's rules.
For example, under the current NSE Capital Market framework, a security priced below ₹250 has a ₹0.01 tick size, while a security priced at or above ₹250 falls into a ₹0.05 tick-size slab. Higher price ranges have progressively larger tick sizes.
This means tick size is not necessarily a permanent characteristic of a stock.
A stock that moves significantly higher can eventually enter a different tick-size category.
Common Mistakes About Tick Size
Confusing Tick Size With Minimum Investment
Tick size has nothing to do with the minimum amount required to buy a stock.
If the tick size is ₹0.01, it does not mean you can buy one share for ₹0.01.
The stock's market price and the quantity purchased determine the investment amount.
Confusing Tick Size With Lot Size
Tick size is a price measurement. Lot size is a quantity measurement.
Mixing the two can lead to incorrect profit and loss calculations, particularly in derivatives.
Assuming One Tick Equals the Same Rupee Profit for Everyone
The monetary impact of one tick depends on the quantity held.
A one-tick movement in a 10-share position and a 10,000-share position will have very different financial consequences.
Ignoring Exchange-Specific Rules
Tick-size rules can differ between equity, derivatives, commodities, and other market segments. They can also be revised by exchanges.
It is therefore better to check the applicable contract or security specifications before trading.
Tick Size and Trading Strategy
For long-term investors, tick size usually has little practical importance. A movement of ₹0.01 or ₹0.05 is unlikely to influence an investment decision based on a company's earnings, valuation, and long-term prospects.
For active traders, however, the picture is different.
If a trader is targeting relatively small price movements, the available price increments can affect where orders can be placed and how closely the trader can control an entry or exit.
This can be particularly relevant for:
- Intraday trading
- Scalping
- Limit orders
- High-volume trading
- Derivatives trading
Conclusion
Tick size may look like one of the more technical parts of the market, but it quietly shapes how orders are placed and matched.
It determines the smallest price step available to traders and forms part of the structure through which buyers and sellers interact. For an investor, it may rarely matter. For an active trader, especially one dealing in small price movements, understanding it can make order placement and profit-and-loss calculations much clearer.
Also Read About: What is Tick Trading?
