Ticks
A tick is the minimum price movement an instrument can make. Tick size defines the increment; tick value defines how much one tick is worth in money terms.
Ticks are the foundation of how prices move. Understanding tick size and tick value keeps your risk sizing accurate.
Ticks are the foundation of how prices move. Understanding tick size and tick value keeps your risk sizing accurate.
What Is a Tick?
A tick is the minimum allowed increment in price. If an instrument has a tick size of 0.25, it can move: 100.00 → 100.25 → 100.50 → 100.75 → 101.00, and so on (but not 100.10).
- Tick size: the smallest price increment.
- Tick value: what one tick is worth in money terms, based on contract size.
⚠️ Why Tick Size Exists
Tick sizes help standardise markets and limit how granular bidding and offering can be. This affects liquidity, spreads, and how order books behave.
Tick Size vs Tick Value
Many beginners mix these up. They are related, but not the same.
| Term | Meaning | Why it matters |
|---|---|---|
| Tick size | The smallest price increment the instrument can move | Determines how precise your order prices can be |
| Tick value | The monetary value of 1 tick for your contract/position size | Determines how much you gain/lose per tick movement |
💡 Simple Example
If a futures contract has a tick size of 0.25 and a tick value of $12.50, then every 0.25 move in price equals $12.50 profit or loss per contract.
Your platform often displays tick size and tick value in the instrument specification or contract details.
Where Are Ticks Used?
- Futures: ticks are the standard unit (e.g., indices, commodities, rates).
- Many shares: tick size can be £0.01 (1p) or venue-dependent.
- Some CFDs: tick behaviour depends on broker quoting, but instruments often still have a minimum increment.
- Order books: tick size impacts market depth and spread behaviour.
Forex retail traders tend to talk in pips/pipettes. Exchange traders often default to ticks.
Examples: Ticks in Practice
Example 1: Tick Size
If an instrument's tick size is 0.5, it can move from 100.0 to 100.5 to 101.0. It cannot print 100.2.
Example 2: Tick Value and P&L
If tick value is £1 per tick and the market moves 15 ticks in your favour, your profit is: 15 × £1 = £15 (before costs).
Example 3: Stop Distance in Ticks
If your stop is 40 ticks away and each tick is £0.50, your risk is: 40 × £0.50 = £20 (before costs).
This is why tick value matters: it turns "movement" into "money risk".
Ticks vs Points vs Pips
- Ticks: minimum price increment, defined by the venue.
- Points: often a larger, human-friendly unit (common in indices/CFDs).
- Pips: forex convention based on decimal places (0.0001 or 0.01 for JPY pairs).
⚠️ Key Idea
You manage risk by converting movement units into money: ticks/points/pips × your contract value. Always confirm the instrument specification, especially when switching markets.
Common Mistakes
- Confusing tick size with tick value: leads to wrong risk calculations.
Fix: find tick value in the instrument spec and use it for sizing. - Assuming all markets have the same tick size: they don't.
Fix: check tick size per instrument. - Placing orders at invalid prices: not aligned to tick increments.
Fix: use the platform's price ladder or it will auto-round. - Ignoring fees/spread: ticks measure movement, not total cost.
Fix: account for spread, commission, and slippage.
✅ Quick Checkpoint
Try answering before expanding the model answers.
1) What is tick size?
The smallest price increment the instrument can move.
2) What is tick value?
The monetary value of one tick for your contract or position size.
3) If tick value is £2 and the market moves 12 ticks against you, what is your loss (before costs)?
12 × £2 = £24.
Next lesson: Lot size (standard).
Frequently Asked Questions: Ticks
Do ticks exist in forex?
Forex can be quoted in minimum increments too, but retail traders usually talk in pips and pipettes instead of "ticks". Exchange-traded currency futures use ticks explicitly.
How do I find tick size and tick value?
Look in your platform's instrument specification/contract details, or the exchange contract specification for futures.
Are ticks always 0.01?
No. Tick size varies by instrument and venue. It can be 0.25, 0.5, 0.1, 0.01, or something else.
Why does tick size matter for liquidity?
Tick size affects how granular price competition can be. Very small ticks can fragment liquidity; larger ticks can concentrate liquidity but may widen spreads. The "best" size depends on the market.
Summary
A tick is the minimum price movement an instrument can make. Tick size defines the increment; tick value defines how much one tick is worth in money terms. Knowing both keeps your order placement and risk sizing accurate.
Next lesson: Lot size (standard).