DEFINITION of 'Downtick'

A transaction on an exchange that occurs at a price below the previous transaction.

In order for a downtick to occur, a transaction price must be followed by a decreased transaction price. This is commonly used in reference to stocks, but it can also be extended to commodities and other forms of securities.

BREAKING DOWN 'Downtick'

For example, suppose stock ABC previously traded at $10. If its next trade occurs at a price below $10, then ABC will be on a downtick.

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