In US shares, a tick used to be worth 1 sixteenth of a dollar – about 60 cents. Now, a tick is worth a cent for stocks worth more than a dollar. In indexes, it depends where you are. For most European indexes, each tick movement represents a 50-cent movement in the index; in the US its worth 25 cents but a full dollar on the Dow Jones, or – if you will – a full point. In short, ticks are small, but only as small as they NEED to be.

The question is, why do we increase and decrease prices in increments of ticks and not along a continuous scale. The answer lies in speed of reaction. Although the term tick comes from the good old days of ticker tapes, which were transmitted by telegraph, today’s markets move in fractions of a second. Especially with high-frequency trading, this can become a problem.

Let’s say I want to put in an order to buy Shell at 27 euros 22. If the increment was not staggered, someone could try to pre-empt me at 27.215. This way, he’d have to enter his order at the previous increment – 27.21, thus levelling out the playing field.
In fact, regulators have a heavy hand in determining tick sizes. Their aim is to prevent market imbalances, and MiFID-2 actually stipulates set relations between asset prices and tick size. They require exchanges to increase tick size when asset prices rise dramatically.

Now, in Forex, we want to know how much a tick is worth so that we can calculate our profits and losses each time our chart line moves. As you’ll remember from our last lesson, that’s done quite easily by multiplying the value of a pip – usually a hundredth of a cent for dollars, by the size of our position – measured in lots of 100,000. Here, it’s the same. In order to calculate the value of a tick, you need to know the contract size for each index, and that’s measured in units called “indexes”.

Minimum contract sizes and tick values can be found on tables you can access on the web. With some trading platforms, like MT5, simply right-click on the asset’s symbol. Also, take into account that each index is quoted in the local currency – the Nikkei in Yen, the FTSE in pounds, and so on. With the DOW, where each tick equals a point equals a dollar, each 1 tick movement equals a dollar. For the FTSE, where each point is equal one pound but two ticks, each tick movement will equal 50 pence.

Commodities are a bit simpler, but – again – you’ll need a table. Crude oil, we can see, increases in ticks of a hundredth of a barrel, while gold increases in increments of a hundredth of a troy ounce. Corn and soybean will be moving by a quarter of a hundred-bushel units – that’s a measuring unit for grains; and coffee by a twentieth of a 100-pound bag – 5 pounds, if you want to simplify things.

Once again, to calculate your profit or loss on a movement, simply multiply the tick value by your contract size.
If we’re looking at gold at 1487.7 per troy ounce, when time the price moves by a tick, it’s moving by a hundredth of the price per ounce – that’s $14.88 per tick.

With bonds, each tick equals a thirty-second of a percent, with a plus sign sometimes used to denote a half tick – that’d be 1-64th of a percent… in the US. In Europe, it’s 1-100th of a percent.