What is a 'Tick'

A tick is a measure of the minimum upward or downward movement in the price of a security. A tick can also refer to the change in the price of a security from trade to trade. Since 2001, with the advent of decimalization, the minimum tick size for stocks trading above $1 is 1 cent.

BREAKING DOWN 'Tick'

A tick represents the standard upon which the price of a security may fluctuate. The tick provides a specific price increment, reflected in the local currency associated with the market the security in question resides, by which the overall price of the security can change.

Prior to April 2001, the minimum tick size was 1/16th of a dollar, which meant that a stock could only move in increments of $0.0625. While the introduction of decimalization has benefited investors through much better bid-ask spreads and better price discovery, it has also made market-making a less profitable (and riskier) activity.

Examples of Tick Size by Market

Investments may have different potential tick sizes depending on the market in which they participate. For example, the E-mini S&P 500 futures contract has a designated tick size of $0.25 while gold futures have a tick size of $0.10.

Price Movement Restrictions based on Tick Size

If a futures contract on the E-mini S&P 500 is currently listed at a price of $20, it can move one tick upward, changing the price to $20.25 based on the $0.25 tick size minimum. However, with that minimum tick size in place, the price of the security could not move from $20 to $20.10 as $0.10 is below the minimum.

Ticks as Movement Indicators

The term tick is also used in reference to the direction of the price of a stock, with an uptick referring to a trade where the transaction has occurred at a price higher than the previous transaction, and a downtick referring to a transaction that has occurred at a lower price. In this context, the uptick rule refers to a trading restriction that prohibits short selling, except on an uptick, presumably to alleviate downward pressure on a stock when it is already declining.

SEC Tick Size Pilot Plan

In 2014, the Securities and Exchange Commission (SEC) began a pilot plan to widen the tick sizes of selected stocks. This was done to promote changes regarding the trading activities surrounding the selected small capitalization stocks, those with market capitalization levels not exceeding $5 billion as well as trading volumes below one million shares daily on average, within the market. The pilot looked to widen the tick size for the selected securities to determine the overall effect on liquidity.

RELATED TERMS
  1. Tick Size

    The minimum price movement of a trading instrument. The price ...
  2. Zero Minus Tick

    A securities trade executed on an exchange at the same price ...
  3. Plus Tick

    A price designation referring to the trading of a security at ...
  4. Minus Tick

    Designates a trade that occurs at a lower price than the immediately ...
  5. Closing Tick

    The difference between the number of stocks that closed higher ...
  6. Tick Index

    The number of stocks trading on an uptick minus the number of ...
Related Articles
  1. Trading

    Advantages Of Data-Based Intraday Charts

    We take a look at these chart intervals and how we can use them to our advantage.
  2. Trading

    An Introduction To Trading Forex Futures

    We explain what forex futures are, where they are traded, and the tools you need to successfully trade these derivatives.
  3. Investing

    Trading The Soft Commodity Markets

    Learn the contract specifications for a few of the most heavily traded commodities.
  4. Trading

    Interpreting Volume For The Futures Market

    Learn how to read the volume reports, look at the relation to liquidity and interpret volume using open interest.
  5. Investing

    Fueling Futures In The Energy Market

    The energy market influences every aspect of our lives, and these four options are its driving force.
  6. Investing

    The Uptick Rule: Does It Keep Bear Markets Ticking?

    This rule prevents traders from driving stocks down, but its effect on market volatility is debatable.
  7. Investing

    Optimal Position Size Reduces Risk

    Finding the right position size can minimize loss for a trader. Find out how.
  8. Investing

    Explaining the Common Size Income Statement

    A common size income statement expresses each account as a percentage of net sales.
  9. Trading

    How Much Trading Capital Do Forex Traders Need?

    Even a small pip profit can mean substantial percentage returns over time.
RELATED FAQS
  1. What is the difference between pips, points, and ticks?

    Learn the differences between points, ticks and pips and how each are used by investors to measure price changes in stocks, ... Read Answer >>
  2. What is the Trade Volume Index (TVI) formula and how is it calculated?

    Find out more about the trade volume index, what it measures, the formulas used for the trade volume index and how to calculate ... Read Answer >>
  3. What is a stock ticker?

    A stock ticker is a report of the price for certain securities, updated continuously throughout the trading session by the ... Read Answer >>
  4. Where did the term 'pip' in currency exchange come from?

    Learn the definition of a pip, what it means in the scope of currency exchanges and how to determine its value. Find out ... Read Answer >>
  5. What is the downtick-uptick rule on the NYSE?

    To ensure orderly markets, the New York Stock Exchange (NYSE) has a set of restrictions that it can implement when experiencing ... Read Answer >>
  6. What are the differences between a bar chart and candle sticks?

    Explore the difference between bar and candlestick charts. Learn how technical analysts use charts in the analysis of supply ... Read Answer >>
Hot Definitions
  1. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  2. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  3. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
  4. Job Market

    A market in which employers search for employees and employees search for jobs. The job market is not a physical place as ...
  5. Yuppie

    Yuppie is a slang term denoting the market segment of young urban professionals. A yuppie is often characterized by youth, ...
  6. SEC Form 13F

    A filing with the Securities and Exchange Commission (SEC), also known as the Information Required of Institutional Investment ...
Trading Center