Tick Test Rules
What are Tick Test Rules?
Also called stock.rules, tick test rules are restrictions on when traders can short a
How Do Tick Test Rules Work?
Also known as a uptick., a downtick occurs when a security sells at a price less than the preceding sale. A downtick is the opposite of an
For example, if there is a trade for XYZ Company at $15 per share, and the next trade is at $12 per share, the XYZare said to be "on a downtick." In the United States, when a is on a downtick, tick test rules generally prohibit traders from shorting the .
Although the term usually refers to, it can also apply to , commodities and other traded securities.
Why Do Tick Test Rules Matter?
Downticks are important because not only do they indicate the price trend of a sales. Tick test rules exist to prevent traders from jumping on the bandwagon to destabilize a 's price ( that exchange-traded can be shorted on a downtick, however)., they also trigger restrictions on short