2025.10.29 2025.10.29
What Is Tick in Trading: Definition, Value & Strategy

Artem Parshinhttps://www.litefinance.org/blog/authors/artem-parshin/

Modern trading in financial markets often comes down to short-term operations and minimal time intervals. The smallest of these is the tick chart — a tool so precise that it shows every trade executed in a security. Despite its unusual structure, tick chart trading still follows the standard principles of technical analysis.

In today’s trading platforms, traders can plot tick charts with intervals from 1 to 1,000 ticks. Intraday traders, day traders, and active traders use tick charts and tick volumes to observe even the smallest price movements when applying scalping trading strategies. In this article, you’ll learn what a tick in trading is, as well as what pips and points mean in the real market, and how this knowledge can improve your personal finance decisions.

Major Takeaways

What Is Tick in Trading: Complete Definition

A tick in trading is the smallest price movement of an asset. Essentially, it indicates that a transaction has taken place in the market. Ticks do not contain trend information; they only show how trading volume has influenced the asset’s price. Since tick movements often correspond to changes in trading volume, they can appear short or long depending on market activity.

Historically, ticks were introduced to show traders partial price changes. Since all stock trading originated in the stock market, before the Securities and Exchange Commission (SEC) regulations, ticks represented the smallest price change in a stock’s dollar value. Today, a tick in trading refers to the minimum price increment — an increase or decrease set by the exchange board. If the trading volume is insufficient to cause the minimum tick size, the price will not move.

Understanding Tick Size Across Financial Markets: What Is Tick Size?

Tick size is the most important parameter of price movement, often illustrated using a tick size chart. It is a fixed value set by a regulatory authority to standardize futures contracts and securities trading.

Another essential element is the tick volume, which can be tracked on most trading platforms. It differs from the standard trading volume shown by volume indicators. Tick volume represents the number of price changes over a given period, while actual trading volume reflects the number of executed trades.

In different markets and for various financial instruments, the tick size may vary depending on the quote type.

Stock Market Tick Sizes

Since stock exchanges in each country have their own specific features, mainly related to the value of the national currency in which securities trading occurs, larger tick sizes may apply under local regulations, so the tick size for stocks differs from one exchange to another.

For example, in the most liquid markets in the United States, the Securities and Exchange Board has set the minimum tick size for all highly liquid stocks trading above one dollar at one cent (0.01 USD), meaning that even a one-cent change in a stock’s price represents one tick. However, some markets use smaller tick sizes for low-priced stocks or less liquid instruments.

Futures Trading and Tick Movements

Futures markets are part of stock exchanges, and their contract standardization rules are established by the same regulatory bodies that oversee securities trading. The difference is that futures contracts have specific terms of execution and usually include leverage, which affects the tick size.

For instance, in the U.S. futures market, the minimum futures tick size for the popular Dow Jones contract is 1 tick, equivalent to $5 according to its contract specifications.

Forex Market: Comparing Ticks and Pips

On the Forex market, the concept of a tick is no different from other markets. It is still the smallest price movement of an asset. However, confusion often arises due to the additional measure known as a pip.

I can tell you from personal experience, more than 90% of traders in the Forex market still confuse points, pips, and ticks.

So, let’s remember once and for all:

• A tick is the smallest possible price movement of an asset.
• A pip is the smallest unit of price change in Forex trading.
• A point is a standard measure of price movement that represents a larger change in value.

Here’s how the difference between these values looks in practice:

• A tick represents a price movement that may range from 0.1 to 10 pips or more.
• A pip is the smallest change in a quote, equal to 0.00001.
• A point is a less precise price change, equal to 0.0001.

There are also Forex instruments with non-standard quotes. For example, in the USD/JPY currency pair, one pip equals 0.001, while one point equals 0.01.

Tick Size vs Tick Value: Key Differences Explained

In fact, the difference between tick size and tick value is quite simple. Tick size is a constant value established by regulatory authorities. Tick value is a dynamic figure that depends on the contract specifications.

In other words, the tick size is a fixed parameter specified in the contract that never changes. The tick value, on the other hand, represents the monetary worth of a one-tick movement. It primarily depends on the lot size. Put simply, the tick value equals the tick size multiplied by the lot size.

How to Calculate Tick Value in Trading

As mentioned earlier, the tick value depends on the tick size and the lot size. The standard tick value formula is expressed as:

TICK VALUE = TICK SIZE × LOT

TICK VALUE = LOT × TICK SIZE / QUOTE

For a directly quoted currency pair like EUR/USD:

TICK VALUE = 0.00001 × 100,000 = 1 USD

For an indirectly quoted pair like USD/CHF:

TICK VALUE = 0.00001 × 100,000 / 0.79539 = 1.25 USD

Trading Strategies Based on Tick Movements

Tick trading strategies based on small price fluctuations are often associated with high-frequency trading, where trading costs can significantly affect overall profitability. This trading style is not suitable for everyone, as it requires high concentration, precise trading strategy settings, and awareness of transaction costs that can impact overall profitability. The essence of tick trading lies in executing a large number of short trades that collectively generate daily profit, with traders focusing on optimal exit points to lock in gains.

Tick Scalping Techniques

Tick scalping is one of the most popular trading strategies based on minor price movements. It focuses on predicting future price changes and identifying pattern trends using various data sources while benefiting from tighter bid ask spreads.

The principle of tick scalping is the same, but its analytical approaches vary. Below are some popular types of tick scalping:

1. Classic scalping based on breakouts of support and resistance levels or reversal patterns using technical indicators such as Stochastic, RSI, CCI, and Momentum.
2. Scalping using bracket orders and One-Cancels-Other orders, allowing traders to react instantly to any price changes.
3. Scalping through the order book, where traders monitor market makers’ buy and sell requests and use volume dynamics to predict price movements.
4. Tick scalping using automated trading systems, which relies heavily on understanding market microstructure and short-term price behavior.

Using Tick Charts for Day Trading

An essential element of tick analysis is the tick chart, a type of chart that displays price movements independently of time.

Tick charts can vary in size, from 1 to 1,000 ticks or even more. This means that with a size of 1 tick, each trade appears as a separate bar on the chart, while with 100 ticks, every 100 trades are combined into one bar.

The chart looks like a regular candlestick chart, but unlike time based charts, it is not tied to time intervals. Its advantage lies in focusing on market volatility rather than time, offering a clearer perspective than traditional time based charts. A set of 100 ticks can form in one minute or over an hour, allowing traders to assess current market conditions and volatility levels.

For different time frames, traders choose various tick sizes, adjusting their entry and exit points accordingly to adapt to market changes. For intraday trading, intervals of 100-133 ticks are most common, while for long-term trading, an interval of around 233 ticks works best.

Conclusion

To sum up, understanding the difference between a tick, a point, and a pip directly affects trading profitability. Trading based on tick movements allows for a more precise strategy that can help reduce market noise and signal upcoming price movements. Tick charts and tick volumes are valuable tools derived from tick data, often used for intraday trading.

However, tick trading carries high risk, especially in volatile markets and fast moving markets. This trading style requires both skill and solid risk management. If a trader is not mentally or technically prepared for such rapid market activity, it’s better to start with slower market dynamics and less frequent price changes.