Tick size is the smallest step by which a stock's price can move. The minimum gap the exchange allows between two valid prices. If the tick is ₹0.05, you can bid ₹100.00 or ₹100.05, but never ₹100.02; the order simply won't be accepted at that price.
Why does a minimum price step exist?
Prices need a common grid so that orders can queue and match cleanly. If traders could quote any fraction, ₹100.001, ₹100.0007. The order book would splinter into thousands of near-identical price levels, each holding a sliver of quantity. Queues would be meaningless, because anyone could jump ahead of you by an invisible amount.
The tick creates fair, countable steps. To move ahead of the queue at ₹100.00, Arjun must bid at least one full tick more, ₹100.05, a visible, meaningful improvement. This is also why quotes cluster: all the waiting interest collects at valid tick levels, giving the depth screen its familiar ladder of stacked quantities instead of a smear of random prices.
How does tick size affect my orders?
- Limit prices must land on a tick. A price that isn't a multiple of the tick is rejected. Nothing is rounded or nudged to the nearest valid price for you, so the order simply doesn't go through and you re-enter it.
- The spread is measured in ticks. The tightest possible market is one tick wide, best bid and best ask one step apart. In a liquid stock the bid-ask spread often sits at exactly one tick; in a thin stock it may be many ticks wide.
- Queue-jumping costs one tick. Whether that is cheap or expensive depends on the stock's price. One tick of ₹0.05 on a ₹50 stock is 0.1%, noticeable. The same tick on a ₹5,000 stock is 0.001% — trivial, so queues there are long and time priority matters more.
Suppose Godavari Cements (a fictional company) trades with a ₹0.05 tick:
| You try to place | What happens |
|---|---|
| Buy at ₹412.35 | Accepted, valid tick |
| Buy at ₹412.37 | Rejected, not on the grid |
| Buy at ₹412.40 | Accepted, one tick better, new queue ahead |
Who sets tick sizes, and do they change?
The exchanges set them, and they revise them from time to time, sometimes linking the tick to the share's price band, so cheaper shares get finer ticks and expensive shares coarser ones. Derivatives contracts have their own tick rules, and a stock's tick can change after events like a split. Don't hard-code a tick in your head: the order window always reflects the current value, and an off-tick price is one of the standard reasons orders get rejected.
Things to keep in mind
- Every price you type must sit on the tick grid; the difference between a fill and a rejection can be two paise.
- A one-tick spread is the sign of a healthy, liquid counter; a spread of many ticks tells you to be careful with market orders.
- Tick sizes are exchange-set and periodically revised. Verify the current tick for your instrument rather than assuming last year's value.
- In F&O, the tick applies to the option premium or futures price, not the underlying share price.
Read next
What are IOC and Day order validity? — How long your order stays in the book before it is cancelled.