1. Market Microstructure

The mechanics of how a trade actually happens. Understanding this turns you from a “price taker” into someone who can read order flow.

The order book (Level 2 / Market Depth)

Every stock has a live, two-sided limit order book (LOB):

        BIDS (buyers)        |        ASKS (sellers)
  Qty       Price            |  Price        Qty
  500   →   2451.05          |  2451.20  ←   300
  1200  →   2451.00          |  2451.25  ←   800
  3500  →   2450.95          |  2451.30  ←   2000
  ...                        |  ...

Best bid = highest buy price.
Best ask = lowest sell price.
Spread = best ask − best bid.
Depth = total quantity stacked at each level.

NSE shows 5 levels by default (top 5 on each side). Brokers offering “20-depth” show 20.

What the book tells you

Tight spread + deep stack → liquid, safe to trade size.
Wide spread + thin stack → illiquid, expect slippage.
Iceberg / hidden orders → only a slice is visible; large players hide size.
Spoofing (now illegal): fake large orders to mislead. Pulls before getting hit.

Order flow & tape reading

The time & sales tape shows every executed trade. Reading it:

Repeated trades lifting the offer (printing at ask) = buying pressure.
Repeated trades hitting the bid = selling pressure.
Sudden block prints = institutional activity.

Most retail tools don’t expose tape well; pro platforms (Bookmap, Sierra Chart) do.

Liquidity

Term	Meaning
Tight market	Small spread, easy to trade
Wide market	Large spread, costly to trade
Deep market	Big size at each level — absorbs orders without moving price
Thin market	Small quantities — your order moves price
Slippage	Difference between expected and actual fill price

Rule: Your single order should be ≤ 1% of the average daily volume (ADV) to avoid moving the market against yourself.

Auctions: open & close

NSE has special auction sessions that determine single-price equilibrium:

Pre-open (09:00–09:15) — orders collected, indicative price published, single matching at 09:08:00.
Closing auction (15:30–15:40) — the official close price for the day.

Why it matters:

Many index/MF rebalances happen at the closing price → predictable end-of-day flows in index stocks.
Pre-open is volatile and noisy — most pros skip the first 5–15 minutes.

Trading sessions & the day’s rhythm

Time (IST)	Behavior
09:15–09:30	Volatile open. Gaps fill or extend. Avoid unless you have an opening-range strategy.
09:30–11:30	Trend day or reversal day usually establishes. High volume.
11:30–14:00	”Lunch” lull. Lower volume. Be careful with breakouts (often fakeouts).
14:00–15:15	Smart money moves. Trends extend or reverse.
15:15–15:30	Squaring off, MIS auto-close at ~3:20. Volatile.

Tick size, lot size, freeze quantity

Tick — minimum price change (₹0.05 for cash equity).
Lot size — F&O contract unit (e.g., Nifty = 25, Bank Nifty = 15, varies per stock).
Freeze quantity — max single order size in F&O. Bigger orders get rejected.

Settlement cycle

T+1 — cash equity. Buy today, shares in demat tomorrow. Funds out tomorrow.
F&O — daily MTM, contract settles on expiry.

Brokerage & charges (the silent killer)

For a typical Indian intraday equity trade (₹1,00,000 turnover):

Charge	Approx
Brokerage (₹20 flat)	₹20
STT (sell side, 0.025% intraday)	₹25
Exchange txn (~0.00322%)	₹3
GST (18% on brokerage + txn)	₹4
SEBI + stamp	₹2
Total round trip	~₹54 = 0.054%

For delivery (CNC), STT is 0.1% on both sides — much costlier for active trading.

If your strategy’s avg edge per trade is < 0.2%, costs will eat you alive.