InvestorQ : Why do tick sizes and spreads matter to intraday trading?
Dia Deshpande made post

Why do tick sizes and spreads matter to intraday trading?

Answer
user profile image
Arya Nanda answered.
2 years ago


Tick sizes refer to the minimum movement in the stock price with sufficient volumes. For an intraday trading, the idea is to stick to stocks that have low tick spreads. This is again an extension of the liquidity and the impact cost argument. But, since we are talking about an intraday trader, the tick becomes very important. The tick is the minimum gap between the two orders. There must be sufficient volumes on each tick to qualify for an intraday trade. You do not want to place an order and realize that your order execution has actually happened several ticks away. A five paisa tick is the most common in India and volumes also matter here. In intraday trades, you try to capitalize trends and so you normally place market orders.
That is why the tick gap becomes a key consideration for intraday stock selection. Smaller the tick gap, the better it is for you.