What is a Tick?
A tick is a minimum change in the price of a security. Also known as a downtick, a minus tick occurs when a security sells at a price less than the preceding sale. A minus tick is the opposite of an uptick.
How Does a Tick Work?
For example, if there is a trade for XYZ Co. at $15 per share, and the next trade is at $12 per share, the first tick would be at $15 and the second tick would be at $12. (In this example, the XYZ shares are said to be 'on a minus tick.')
Before 2001,traded in increments of 1/16th of $1 (about $0.0625). That means that a security had to change by at least that amount. (This is no longer the case.)
Why Does a Tick Matter?
Ticks are important because they indicate the price trend of a short sale rule or the tick test) exists to prevent traders from jumping on the bandwagon to destabilize a 's price ( that exchange-traded funds can be shorted on a minus tick, however).. They also trigger restrictions on short sales. In the United States, when a is on a minus tick, traders are generally prohibited from shorting the . This rule (called the