When trading in the stock market, choosing the right order type is critical to your success. Two popular order types are NRML (Normal Margin) and MIS (Margin Intraday Square-off). Both serve different purposes and understanding how they work can help you make better trading decisions. This article delves into the differences between these two types, how to use them, and when each is most appropriate.
What Is NRML in the Share Market?
NRML, meaning in the share market, refers to a trading order that permits traders to hold their positions overnight or for multiple days. This makes NRML an ideal choice for traders engaged in futures, options, and currency segments, where trades are not just limited to a single day. NRML traders are not required to close their positions by the end of the day. Instead, they can wait for the expiration date or manually close the position whenever they deem it appropriate.
One of the advantages of NRML trading is that it provides flexibility, allowing you to hold positions until market conditions are favourable. However, NRML trading requires a higher margin because it covers potential market fluctuations over several days. For this reason, NRML is typically used by traders looking to capture broader market trends.
What Is MIS in the Share Market?
On the other hand, MIS (Margin Intraday Square-off) is designed for those who trade within the same day. It requires all positions to be squared off before the market closes, making it the go-to choice for intraday traders. MIS orders allow for significant leverage, enabling traders to take larger positions with smaller capital. However, all positions must be closed by the end of the trading day, or they will automatically be squared off by the broker.
MIS is well-suited for traders looking to profit from short-term price movements during a single trading session. This type of order is frequently used in equity, F&O, and commodity markets, where intraday price volatility provides opportunities for quick profits.
Know More About Order Types in Stock Market
Difference Between NRML and MIS
Now that we have a basic understanding of both NRML and MIS orders let’s delve into the key differences between them. The primary difference lies in the duration for which the position can be held. While NRML allows for positions to be carried forward over multiple days, MIS requires all positions to be closed by the end of the trading day.
| Feature | NRML (Normal Margin) | MIS (Margin Intraday Square-off) |
| Position Duration | Positions can be held overnight or over multiple trading days | Positions must be closed by the end of the trading day |
| Market Segment | Typically used in Futures, Options, and Currency segments | Used in Equity, F&O, and Commodities segments for intraday trades |
| Margin Requirement | A higher margin required to cover the overnight risk | A lower margin required as positions are limited to the trading day |
| Leverage | No leverage offered | Leverage provided based on the stock or segment |
| Automatic Square-off | Positions are not automatically squared off | Positions are automatically squared off at the end of the day if not manually closed |
| Suitable for | Swing traders and position traders holding long-term positions | Intraday traders looking to profit from short-term price movements |
| Decision-making Pace | Moderate, allowing time for analysis | Fast-paced, requiring quick decision-making |
What Is the Difference Between MIS and Normal Trading?
The difference between MIS and normal trading (NRML) is clear-cut: MIS is specifically designed for intraday trading, while NRML accommodates positions that can be held for a longer period. In MIS trading, all positions must be closed by the end of the trading day, or they will be automatically squared off. This type of trading focuses on making quick profits by capitalising on short-term market movements.
MIS trading requires less margin than NRML trading because the risk is contained within the same trading day. This makes it an attractive option for day traders who need to make fast decisions to profit from small price changes.
MIS also offers leverage, enabling traders to take larger positions than their capital would otherwise allow. However, the use of leverage in MIS trading comes with its risks, as losses can be magnified if the trade does not go in your favour.
How and When to Use NRML vs MIS?
Choosing between NRML and MIS depends on your trading style and objectives. If you are an intraday trader looking to profit from quick price movements, MIS is your best bet. This order type requires constant monitoring of the market and rapid decision-making, as positions need to be closed within the trading day.
Conversely, if you prefer to hold positions for several days or weeks to capture larger market trends, NRML is more suitable. The ability to hold positions overnight makes NRML ideal for swing traders or those involved in futures and options trading.
Here’s a breakdown of when to use each order type:
Use NRML when:
- You are trading futures, options, or currencies and wish to hold your position overnight.
- You have a longer-term outlook and prefer to capture larger market moves.
- You are comfortable with the higher margin requirement and potential overnight risks.
Use MIS when:
- You want to trade within a single day and are looking to profit from intraday price movements.
- You prefer leverage, allowing you to control larger positions with less capital.
- You are able to monitor the market throughout the trading day and can make quick decisions.
Conclusion
Understanding the key differences between NRML and MIS is essential for developing the right trading strategy. NRML allows for longer-term positions, making it suitable for futures and options traders who prefer a patient approach.
On the other hand, MIS is ideal for intraday traders looking to leverage their capital for short-term gains. Knowing when and how to use each order type will help you make more informed trading decisions and manage your risk more effectively.
FAQs
Which is better, MIS or NRML?
It depends on your trading style. MIS is ideal for intraday trading with leverage, while NRML suits traders holding positions overnight or for multiple days. NRML offers no leverage but allows for longer-term strategies.
What is NRML order type?
NRML (Normal Margin) is an order type that allows traders to hold positions overnight or until the contract’s expiry. It is used in futures, options, and commodities trading without leverage for longer-term market strategies.
What is MIS order type?
MIS (Margin Intraday Square-off) is an intraday order type that allows traders to buy and sell stocks within the same day using leverage. All positions must be squared off by the end of the trading session.
Can I use NRML for intraday trading?
Yes, you can use NRML for intraday trading, but it doesn’t provide leverage like MIS. You can also convert NRML to MIS, provided sufficient margin is available in your trading account.
How long can I hold NRML?
NRML positions can be held overnight or until the contract expires. There is no set time limit for holding NRML positions, giving traders flexibility for longer-term strategies in futures and options trading.
What happens if I convert NRML to MIS?
If you convert NRML to MIS, the trade becomes an intraday position and must be squared off by the end of the trading day. You can also use leverage after converting to MIS, but positions cannot be carried overnight.
