How Common Tick Trading Terms Impact Your Strategy

If you’ve recently entered the world of trading, you may have come across the term tick trading. It may sound technical or complex at first, but it simply refers to trading strategies that focus on the smallest price changes in a stock, known as ticks. Understanding common tick-related terms is essential because these small movements can significantly affect your overall trading strategy, especially if you’re a frequent trader.

What Is Tick Trading?

Tick trading is a method where traders try to make money from small changes in stock prices, called “ticks.” A tick is the amount by which the price of a stock or other security can increase or decrease. In tick trading, individuals try to earn small gains many times in a day, instead of holding the stock for weeks or months. This is often done by active traders or experts with fast trading tools.

What Is Tick Size?

Tick size is the smallest unit by which a stock’s price can change. The stock exchange sets it. In India, tick sizes are regulated by the Securities and Exchange Board of India (SEBI).

Here’s a simple example:

• If the tick size is ₹0.05, and a stock is priced at ₹100.00, the next possible prices are ₹100.05, ₹100.10, ₹100.15, and so on.
• You cannot place a trade at ₹100.03 because it’s not allowed by the exchange.

Tick size is important because it sets the price movement rules. It also impacts how much profit you can earn from each trade and how fast prices move.

Why Tick Size Matters in Your Trading Strategy

Here’s how tick size can affect your trading:

• Smaller tick size: When tick sizes are small, like ₹0.05, the price changes more often. This allows traders to make more frequent trades. It means they can enter and exit trades quickly.

• Bigger tick size: For stocks with larger tick sizes, like ₹1.00 or ₹5.00, prices change slowly. This suits long-term investors who don’t need to trade many times in a day.

• Tight spreads: A smaller tick size usually means a more minor difference between the buying price and the selling price, which is good for fast trading.

In short, tick size affects how fast, how often, and how profitably you can trade.

What Is a Tick in Market Terms?

The word tick is also used to describe market movement. There are two types of ticks:

• Uptick: When the price of a stock goes up from the previous price.
• Downtick: When the price of a stock goes down from the previous price.

Traders often use tick charts to track these tiny price changes in real-time. These charts show every single trade and are useful for those using scalping or momentum trading strategies.

Point vs. Tick – What’s the Difference?

When it comes to stock price movements, two commonly used terms are point and tick, but they mean very different things.

• A tick is the smallest possible price change in the decimal part. For example, ₹100.00 to ₹100.05 is one tick, if the tick size is ₹0.05.
• A point is a full unit of change. For example, ₹100.00 to ₹101.00 is one point.

So, a tick is smaller than a point. When people say a stock moved 10 ticks, they mean it moved in small steps. If they say it moved 2 points, it means a bigger movement.

Let’s say an individual is using tick trading. They see a stock moving between ₹220.00 and ₹220.15. They place a purchase order at ₹220.00 and a sell order at ₹220.15.

Then repeat this trade 50 times in a day. If they trade 1,000 shares each time and earn ₹0.15 per share, their profit is ₹7,500 for the day.

Important Update on Tick Sizes (India)

From April 15, NSE changed the tick sizes for some stocks:

• ₹1,000–₹5,000: Tick size is now ₹0.10 (earlier it was ₹0.05)
• ₹5,000–₹10,000: Tick size is ₹0.50
• ₹10,000–₹20,000: Tick size is ₹1.00
• Above ₹20,000: Tick size is ₹5.00

These changes make a difference in how prices move. For higher-priced stocks, price steps are bigger now. So, if you’re trading such stocks, your tick trading strategy must change, too.

How to Start Tick Trading?

If you want to try trick trading, here are the steps:

• Open Demat Account: Before you begin trading, you must open a Demat account. This is where your shares are stored in an electronic form. Findoc offers simple and fast account opening with zero charges, perfect for beginners looking to explore tick trading.
• Use Real-Time Data: You need tools and platforms that give you real-time price data to catch every small movement.
• Start Small: Begin with fewer shares or practice in a demo account before investing real money.
• Have a Plan: Tick trading moves fast. Decide your entry, exit, and stop-loss points before starting.

Conclusion

Tick trading is all about making small profits from tiny price changes. To do this well, you must understand terms like tick size, uptick, downtick, and point. These terms may seem small, but they make a big difference in how your strategy works.

So, if you’re ready to explore the world of fast trades and quick moves, make sure you know these basic terms. And most importantly, a trustworthy platform and tools to assist you in achieving success in your trading journey.