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I place a limit order and someone instantly places an order 1 tick size better than my order. Why?

A significant part of the traded volumes on stock exchanges across the world comes from algorithmic trading. This also stands true in the Indian context. One such algorithm is the "Active Relative Algorithm".

An active relative algorithm is used when the algorithmic trader seeks a more aggressive price than the best bid and offer price. The order price is automatically adjusted as the market moves to keep the orders more aggressive. As a result, every time you place a bid or an ask, the algorithm will try to place an offer a few tick sizes better than your order. The tick size on NSE and BSE is Rs. 0.05 in most cases.