Limit Orders on the NSE: Reading Order Book Depth and Tick Sizes

What a limit order actually does

A limit order tells the exchange the exact price beyond which you refuse to trade. A buy limit at Rs 700 means buy at Rs 700 or cheaper, never higher. A sell limit at Rs 700 means sell at Rs 700 or more, never less. The order does not chase the market. It waits in the order book until someone is willing to meet your price. This is the opposite of a market order, which says fill me now at whatever price is available.

The trade-off is simple and unavoidable. With a limit order you control the price but you do not control whether it fills at all. If the stock never reaches your level, your order just sits there and expires unfilled at the end of the day, or stays as a Good Till Triggered order if your broker offers GTT. A market order guarantees a fill but not a price. In a fast move on Bank Nifty or a thinly traded small cap, that gap matters more than beginners expect.

On the NSE, every limit order joins a continuous double-sided auction. Buyers post bids, sellers post asks, and the exchange matches them using price-time priority. The best price gets served first, and among orders at the same price, the one entered earliest fills first. Understanding where your limit price lands in that queue is the whole game, and the tool that shows you is the market depth window.

Reading a real NSE order book: a Reliance snapshot

The single most useful thing a trader can do before placing a limit order is open the market depth window, often called Snap Quote or Level 2. The NSE publishes the best five bid levels and best five ask levels for every stock, with the total quantity resting at each price. Below is an illustrative snapshot of Reliance Industries (RELIANCE) around an intraday price of Rs 1,478. Numbers are realistic but illustrative, not a live quote.

Read it from the middle outward. The highest price a buyer will pay right now is the best bid, Rs 1,477.85. The lowest price a seller will accept is the best ask, Rs 1,477.90. The gap between them, here just 5 paise, is the bid-ask spread. Reliance is highly liquid, so the spread is one tick wide. In an illiquid stock the spread can be 50 paise or more, which is a hidden cost every time you cross it with a market order.

The quantity columns show depth. There are 1,240 shares wanting to buy at Rs 1,477.85 and 860 shares offered for sale at Rs 1,477.90. If you place a buy limit at Rs 1,477.90 you cross the spread and take the offer, filling immediately against that 860 lot. If you place a buy limit at Rs 1,477.85 you join the back of the existing 1,240-share queue at the best bid and wait. A buy limit at Rs 1,477.80 sits one level deeper and will not fill until everything above it is exhausted.

Tick size: why your price must be a round step

A tick is the smallest price increment the exchange will accept. For the vast majority of NSE cash-market equities the tick size is 5 paise (Rs 0.05). That is why every price in the Reliance book above ends in .85, .90, .95, .00, .05 and so on. You cannot place a limit order at Rs 1,477.87 because it is not a multiple of 5 paise. The exchange rejects it instantly. Index and stock option premiums on the NSE also move in 5 paise ticks, so a Nifty option limit at Rs 142.30 is valid while Rs 142.33 is not.

Tick size is not always 5 paise. For stocks priced below Re 1, the NSE applies a finer tick of 1 paisa so the percentage spread does not become absurd. SEBI introduced a framework to reduce ticks on very low priced securities precisely so a 5 paise step does not represent a huge percentage of the price. Always confirm the tick on the contract specification page before assuming it. The practical lesson is that your limit price has to land on a legal tick, and the depth window already shows you exactly which prices are legal.

• Most NSE equities and ETFs: tick size Rs 0.05 (5 paise).
• Equities priced below Re 1: finer tick of Rs 0.01 (1 paisa) under the SEBI low-price framework.
• Index and stock options (Nifty, Bank Nifty, FinNifty): premium tick Rs 0.05.
• A limit price that is not a whole multiple of the tick is rejected by the exchange before it ever reaches the book.

Worked equity example: a buy limit on HDFC Bank with full charges

Suppose you want to buy 200 shares of HDFC Bank for delivery. The stock is trading around Rs 1,650 but you think it will dip on a market wobble, so you place a buy limit at Rs 1,640. The order rests in the book. Later in the session the price falls and sellers hit your bid, filling all 200 shares at Rs 1,640. Your buy value is 200 times Rs 1,640, which is Rs 3,28,000. All figures below are illustrative and use typical discount-broker rates, not a promise of any specific cost.

On a delivery equity buy, most discount brokers charge zero brokerage. The statutory charges still apply. STT on delivery is 0.1 percent on the buy side, which is Rs 328. Exchange transaction charges are a tiny fraction, roughly Rs 9. GST at 18 percent applies on brokerage plus transaction charges, here about Rs 1.62. SEBI turnover fee is Rs 0.0001 percent, a few paise. Stamp duty on buy is 0.015 percent, about Rs 49. The total cost of entry is therefore close to Rs 388 on top of your Rs 3,28,000, almost all of it STT and stamp duty.

Now say you sell all 200 shares 8 months later at Rs 1,820, for a sell value of Rs 3,64,000. Sell-side STT of 0.1 percent is Rs 364, plus small exchange, GST and SEBI charges. Your gross gain is Rs 3,64,000 minus Rs 3,28,000, or Rs 36,000, before charges. Because you held under 12 months, this is a short-term capital gain taxed at 20 percent under the post-July-2024 rule, so roughly Rs 7,200 of tax, plus 4 percent cess on the tax. Had you held more than 12 months it would be a long-term gain taxed at 12.5 percent on the amount above the Rs 1.25 lakh annual exemption. The limit order got you a better entry price, but the taxes and charges are identical to what a market order would have paid.

Worked options example: a sell limit on a Nifty call

Limit orders matter even more in options because spreads are wider and a market order can fill at a shocking price. Take a weekly Nifty 24,500 call quoted with a best bid of Rs 138.00 and a best ask of Rs 139.50, a spread of Rs 1.50. The Nifty lot size is 65. You want to sell one lot you already hold. If you panic and use a market order, you hit the bid and sell at Rs 138.00. If instead you place a sell limit at Rs 139.40, you join the ask queue and let a buyer come to you. Suppose it fills at Rs 139.40.

Your sell premium is 75 times Rs 139.40, which is Rs 10,455. If you had originally bought that call at Rs 110.00, your buy cost was 75 times Rs 110.00, or Rs 8,250. Gross profit is Rs 10,455 minus Rs 8,250, equal to Rs 2,205 before charges, all illustrative. STT on options is charged at 0.1 percent on the sell-side premium (effective from October 2024), which here is about Rs 10.46. Brokerage at a flat Rs 20 per executed order on each leg, exchange transaction charges on options turnover, GST on those, plus a small SEBI fee and stamp duty bring total charges to roughly Rs 70 to Rs 90 for the round trip.

Net profit lands near Rs 2,120. Notice the difference the limit order made: selling at Rs 139.40 instead of Rs 138.00 added Rs 1.40 per unit times 75, which is Rs 105 of extra premium, larger than the entire round-trip charge. That is the practical value of working a limit at the ask rather than crossing the spread. Remember that Nifty options profit is business income, not capital gains. It is added to your other income and taxed at your slab rate, and you may owe advance tax on it through the year.

Limit order versus market order: when to use which

A market order prioritises certainty of execution and accepts whatever price the book offers. A limit order prioritises price and accepts the risk of not filling. Neither is better in the abstract. The right choice depends on liquidity, urgency and how wide the spread is. In a deep, tight name like Reliance or an index, the difference is a paisa or two. In a thin small cap with a 1 percent spread, a careless market order can cost you real money the instant you click.

A useful middle path is the marketable limit order: a buy limit set at the current best ask, or a sell limit at the current best bid. It fills immediately like a market order but caps your worst price, protecting you from a sudden gap or a stale quote. Many experienced Indian traders use marketable limits as their default instead of true market orders, especially in options, precisely because it removes the tail risk of a freak fill.

Price-time priority and where your order sits in the queue

The NSE matching engine follows strict price-time priority. First, the best price wins. A buy limit at Rs 1,477.85 will always be served before a buy limit at Rs 1,477.80 because it is a better price for sellers. Second, among orders at the same price, the order that arrived earlier fills first. This is why simply matching the best bid does not jump you to the front. If 1,240 shares were already queued at Rs 1,477.85 before you, all of them must fill before a single share of yours does.

This has a concrete consequence for traders. If you genuinely want to be filled, you often have to price one tick better than the current best level to gain priority, or cross the spread entirely. Sitting passively at the back of a long queue means you may watch the price touch your level, fill the orders ahead of you, and move away before reaching you. The depth window quantity is your guide to how long that queue is and whether it is worth joining or jumping.

• Better price always beats worse price, regardless of when it was entered.
• At the same price, earlier orders fill before later ones (time priority).
• To gain priority, improve the price by one tick rather than matching the existing level.
• The quantity at each level in the depth window tells you how deep the queue ahead of you is.

Order validity, GTT and SEBI guardrails

A limit order does not live forever by default. Most NSE limit orders are Good For Day (DAY), meaning any unfilled portion is cancelled when the market closes. Brokers also offer IOC (Immediate Or Cancel), which fills whatever it can instantly and cancels the rest, and broker-level GTT (Good Till Triggered) orders that watch a trigger price for up to a year and then place your limit order. True exchange-level Good Till Cancelled is not standard in Indian cash equity, so GTT is the practical way to keep a resting price target for weeks.

SEBI and the exchanges wrap several protections around limit orders. Price bands and circuit limits stop you from placing a limit far outside the day's allowed range. Index F and O have operating ranges and dynamic price bands that reject orders too far from the prevailing price, to curb fat-finger errors and manipulation. There are also order value and quantity freeze limits per order. These rules mean a limit order priced absurdly will simply be rejected rather than parked in the book, which protects the whole market from erroneous prints.

How limit orders shape liquidity and the spread

Every resting limit order is a small piece of liquidity offered to the market. Traders who post limit orders are liquidity providers or makers. Traders who hit those orders with market orders or marketable limits are liquidity takers. A book stacked with limit orders at many levels has good depth, which narrows the spread and lets large orders execute without moving the price much. A thin book with gaps between levels has poor depth, wide spreads and violent moves on modest volume.

This is why reading the depth window before sizing a trade matters. If you want to buy 5,000 shares of a mid cap but the best three ask levels together hold only 1,800 shares, a market order will walk up the book, filling at progressively worse prices, an effect called slippage. A patient limit order, or splitting the order across time, lets you avoid paying that slippage. Large clusters of limit orders also act as informal support and resistance, since a wall of buy limits can hold a price up and a wall of sell limits can cap it.

Common mistakes and a practical checklist

The classic error is placing a limit and assuming the touch of your price guarantees a fill. Because of time priority, the price can reach your level, fill everyone ahead of you and reverse, leaving you unexecuted. The second common error is ignoring liquidity: a perfectly reasonable limit in an illiquid stock can sit all day. The third is forgetting that a stale limit left in the book during news can fill against you at exactly the wrong moment, which is why disciplined traders cancel or update orders when the thesis changes.

• Open the market depth window and read the spread and quantity at each level before pricing your order.
• Confirm your limit price is a legal tick (a multiple of Rs 0.05 for most names).
• Decide consciously whether you want priority (price one tick better or cross the spread) or patience (rest at a level and accept the no-fill risk).
• In options near expiry, never use a blind market order; use a limit priced to cross the spread so you cap your worst fill.
• Set the right validity (DAY, IOC or GTT) for how long you actually want the order to live.
• Cancel or revise resting limits when your reason for the trade changes or major news hits.

Sources and further reading

For authoritative contract specifications, tick sizes, price bands and live market depth, refer to NSE India, the rule framework at SEBI, and the practical tutorials at Zerodha Varsity. All numbers on this page are illustrative for learning and are not investment advice or a promise of returns. Always confirm current tick sizes, STT rates, charges and contract specifications on the official source before you trade.

Sources and Further Reading

For authoritative data and further reading on this topic, refer to NSE India, SEBI (Securities and Exchange Board of India) and Zerodha Varsity. Always confirm current rules, rates and contract specifications on the official source before you trade.