What Is a Plus Tick?
In the context of securities pricing, a completed trade that results in the price moving up or down is said to make a tick up or a tick down, respectively. A plus tick is another way of referring to an upward change in the price of a security. The reference point for the upward change is relative. For example, the upward change in the price of a security can be relative to the previous tick, the opening tick of the last several minutes, or even the closing price of the security from the previous day.
- Plus tick refers to the upward change in the price of a security as a result of a single trade or a group of trades at the same price.
- A plus tick is also sometimes referred to as an uptick.
- A plus tick used to refer to an upward daily change of a stock compared to its previous day's close; its usage has broadened to refer to any upward change in price from a reference point.
How a Plus Tick Works
A plus tick–also known as an uptick–designates that a specific security has gone up in price. Historically, when the phrase was used in printed papers, financial journalists were usually referring to the change between the most recent day being reported and the previous day before that one. When the data was captured in a newspaper page, the change would have a plus symbol "+" in front of the amount. In the illustration below, each of the days marked with a green candle is equivalent to a "plus tick" day because the security price closes higher than the day before.
In the 2000s, as electronic access and digital news delivery became more prevalent, the term took on a different meaning. Today, a plus tick is more commonly associated with a trade that causes the price of a security to rise. Such moves can be spotted in the following illustration of a tick chart, which shows every price change to Exxon Mobil (XOM) shares over a one-minute period.
There are rules in place to determine the tick status, which will then impact the types of trades that are allowed on that security. In addition to the plus tick, there is a downtick, which refers to a security transacting at a lower price point than the previous day. In intraday trading, a downtick refers to a price that is lower after the most recent trade. The rules used to determine the tick status also influence other rules. For example, the downtick-uptick rule on the New York Stock Exchange (NYSE) may be triggered based on a running count of upticks and downticks. The uptick rule also determines whether or not a trader is allowed to short sell.
Futures markets have varying tick sizes. While a plus tick and downtick are indicators of the overall daily adjustment, different types of markets assign different values to the securities that are traded within them. A plus tick in one market will have a different monetary value than a plus tick in another market. As an example, the measure of a tick on the S&P 500 Futures Index is 25 cents whereas a gold futures tick is ten cents.
From 2016 to 2018, the Securities and Exchange Commission (SEC) explored a pilot system that allowed for larger tick points for smaller stocks. The pilot gathered data for approximately two years and consulted with the national securities exchanges and the Financial Industry Regulatory Authority (FINRA) before concluding that such a change was not beneficial or necessary.
Price Tick vs. Bid Tick
A bid tick is a measurement of the movement of bid prices. It is used to determine if they are higher, lower, or unchanged from the previous bid price. The bid tick index has a short life span and only remains accurate for short periods of time as a result of frequent market fluctuations.
The bid tick is most relevant for day traders who need to consider the entire market at a given time. Day traders will try to identify any bulk purchases or sales during this time. Bid ticks have maximum movements. For example, if a stock is prices at $5 and has a $1 tick size, the next bid amount would need to be made at $6 (as opposed to $5.01). Investors use the bid ticks to gauge how the market will move and get an approximate idea of what the bid-ask spread will be.