What Is a Plus Tick?
In the context of securities pricing, a completed trade that results in a price movement 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.
- A plus tick refers to an 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 formerly referred to an upward daily change of a stock compared to its previous day's close. The usage has now broadened to refer to any upward change in price from a reference point.
How a Plus Tick Works
A plus tick, or uptick, indicates that the price of a security has increased. Historically, the phrase was used in printed newspapers in reference to the change between the most recent day being reported and the day before. When newspapers printed market reports, the change would have a plus symbol "+" in front of the amount.
In the candlestick chart below, each of the days marked with a green candle is equivalent to a "plus tick" day because the security price closed higher than the day before. The red candles refer to downticks, where the price falls from one trading day to the next.
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 specific 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.
Rules on Plus Ticks and Down Ticks
Tick status is closely regulated by government and exchange bodies. For example, the downtick-uptick rule was formerly used to reduce trading on the New York Stock Exchange (NYSE) during periods of high volatility. This rule limited the volume of certain stocks if the NYSE Composite Index had moved by more than 2% from the previous day. The downtick-uptick rule was eliminated in 2007.
There was also the uptick rule, stipulating that short-sellers could only sell securities on an uptick. This rule was also eliminated in 2007. The alternative uptick rule, implemented in 2010, limits short sales of securities that fall more than 10% in one day.
"Tick size" refers to the minimum price change for a security. Each exchange regulates the tick sizes of its securities.
Futures markets have varying tick sizes, and a plus tick in one market will have a different monetary value than a plus tick in another market. For example, the tick size of the S&P 500 Futures Index on the Chicago Mercantile Exchange is $25, whereas a gold futures tick is ten dollars.
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 Ticks vs. Bid Ticks
A bid tick measures the movement of bid prices. It is used to determine if buying demand is higher, lower, or unchanged from the previous bid. The bid tick index has a short life span and only remains accurate for short periods of time as the market fluctuates.
The bid tick is most relevant for day traders who need to consider the entire market at a given time. Bid ticks have maximum movements, and day traders try to identify any bulk sales or trades. For example, if a stock is priced at $5 and has a $1 tick size, the next bid amount would need to be made at $6 (as opposed to $5.01). Traders use bid ticks to gauge how the market will move and get an approximate idea of the bid-ask spread.