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When placing trades in the stock market, selecting the correct order type is just as important as choosing the right security. CNC, MIS, and NRML are commonly used order categories that determine whether a trade is meant for intraday trading, delivery-based investing, or positional trading in derivatives.
Each order type follows different margin rules, holding periods, and settlement conditions. Understanding how these orders work can help traders and investors manage positions more efficiently and avoid unintended trade execution.
Key Takeaways
- CNC orders are mainly used for delivery-based equity trading and allow investors to hold shares overnight or for the long term.
- MIS orders are meant for intraday trading and are automatically squared off before the market closes if not exited manually.
- NRML orders are commonly used for positional trades in F&O and currency segments where positions can be carried overnight.
- The choice between CNC, MIS and NRML depends on the trade duration, market segment and margin requirements.
What is CNC in Trading?
CNC stands for Cash and Carry. It is a type of order used to take delivery of equity shares in the stock market. In other words, CNC orders are used for delivery-based trading in the cash segment of the equity market. You can use this type of order when you want to hold a position overnight.
Since this is not an intraday trade, CNC orders generally do not include intraday leverage. Additionally, you cannot open short positions using CNC orders because short trades are only permitted in the intraday trading segment. CNC orders can be used to buy shares for delivery and sell them later whenever required.
You may use a CNC order to initiate a long delivery-based trade. However, if you use another CNC order to close that trade in the same trading session, the entire trade will be considered an intraday transaction rather than a delivery-based trade.
What is MIS in Trading?
MIS is short for Margin Intraday Square-Off. As the name indicates, you can use this type of order to carry out intraday trades in the equity and derivatives segment. Such orders must be closed within the same trading day. Otherwise, they will automatically be squared off and not be carried overnight.
Intraday trades placed using the MIS order type may be eligible for intraday leverage, depending on the trading platform and applicable rules. The extent of leverage varies from one service provider to another, but ultimately, this feature helps you take larger positions in the intraday trading segment with relatively low capital. While this helps you trade larger holdings, it also amplifies the risk accordingly.
What is NRML in Trading?
NRML is short for Normal. This type of order is typically used for positions other than intraday trades in the derivatives market. You can use an NRML order to carry your futures or options positions till expiry (or for several trading days, even if it is not until expiry). It can also be used for delivery-based trades of currency. Since NRML positions are carried beyond a single trading session, intraday leverage is generally not available for these orders.
NRML orders require SPAN + Exposure margin for F&O trades. SPAN (Standardized Portfolio Analysis of Risk) is updated 6 times daily and simulates 16 risk scenarios. The exact margin depends on the underlying asset's volatility.
CNC vs. MIS Orders
After understanding these order types, it is important to see how they differ from each other. First, let’s compare CNC and MIS orders.
| Particulars | CNC Order | MIS Order |
| Meaning | Cash and Carry | Margin Intraday Square-Off |
| Purpose | Used for delivery-based equity trading | Used for intraday trading |
| Leverage | Full payment is usually required, and intraday leverage is generally not available | Leverage may be available for MIS trades, allowing positions to be taken with lower upfront capital |
| Holding Period | Stocks purchased using CNC orders can be held indefinitely | MIS positions must be squared off within the same trading day |
| Auto Square-Off | No auto square-off | 3:15 PM for the Equity segment and 3:20 PM for the F&O segment. |
| Risk | Lower risk because there is no forced square-off | Higher risk since positions are automatically closed by the end of the trading day |
| Settlement | T+1 settlement cycle | No delivery, so only intraday profits or losses |
| Suitable For | Investors with a medium-term or long-term outlook | Intraday traders who wish to profit from daily price movements |
MIS vs NRML Orders
Here is a simple comparison between MIS and NRML orders.
| Particulars | MIS Order | NRML Order |
| Meaning | Margin Intraday Square-Off | Normal |
| Purpose | Used for intraday trading | Used for positional trades in the derivatives segment |
| Leverage | Leverage may be available, allowing trades with lower upfront capital | Intraday leverage is generally not available |
| Holding Period | Holding period is just one trading day since positions are squared off intraday | Holding period is more than one trading day and often lasts till expiry |
| Auto Square-Off | Positions are automatically squared off before the market closes | No auto square-off, so your trades only close when you manually exit them |
| Risk | Can involve higher risk because positions are closed within the same trading day | Risk depends on market movement and position size |
| Cost of Carry | No cost of carry since positions are not held overnight | Cost of carry applies to overnight trades |
| Suitable For | Intraday trading across equity, F&O, and commodities segments | Positional trades in the F&O and currency trading segments |
Read More About :NRML vs MIS
Which Type of Order to Use?
Knowing what NRML is, what MIS is, and what CNC is is one thing. However, you should also be clear about which order to use when.
Ideally, CNC orders are best used for delivery-based trades in the equity market. So, if you want to hold stocks for the long term (or even overnight), you can use CNC orders. Remember, though, that there’s no leverage involved, and you will have to make the full payment required.
MIS orders, on the other hand, are best suited for intraday trades where you buy and sell stocks or securities within the same trading day. You can use this type of order if you want to take advantage of daily price movements in a specific asset. While you get the advantage of leverage here, your position will be automatically closed when the trading session ends.
NRML orders can be useful if you want to trade positionally in the F&O or currency segments. You can use these orders if you want to hold a position overnight or longer. That said, remember that in certain derivatives trades, you will have to deposit an initial margin as well as a maintenance margin to keep your positions open.
Also Read About: Types Of Orders in Stock Market
Conclusion
CNC, MIS, and NRML orders are designed for different trading requirements and should be selected based on the intended holding period and market segment. CNC orders are generally used for delivery-based equity trades, MIS orders are meant for intraday positions, and NRML orders are commonly used for overnight or positional trades in derivatives and currency markets. Understanding the purpose and conditions attached to each order type can help traders manage margin requirements, position holding and trade execution more effectively.
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