What Is Tick Size in Investing?

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Tick size is the minimum difference between the highest buy price and the lowest sell price of a security that can be displayed. In the U.S., the tick size for any security trading at or more than a dollar is 1 cent.

Key Takeaways

  • Tick size is the minimum difference the market can display between buy and sell prices.
  • Tick size differs from market to market, but is 1 cent for stocks with a share price greater than $1 in the U.S.
  • The tick size of a security influences the amount by which its price can change.
  • The larger the tick size for a security, the fewer ticks it must move to produce the same price change, compared with a security with a smaller tick size.

How Does Tick Size Work?

When researching stocks, you’ll typically see a quoted price for those securities, down to the penny. For example, stock XYZ might be quoted on the market at $25.73. Usually, the quoted price is the price at which the most recent transaction involving that security occurred.

Tick size affects the prices that investors can offer when trying to buy or sell shares. In effect, it determines the amount by which a share’s price can change with each transaction.


Smaller tick sizes allow for smaller changes in a security’s price, while larger tick sizes means any movement in ticks would result in a larger price change.

Behind the scenes, there are usually many investors who have active buy and sell orders for XYZ. There may be many people willing to sell for more than $25.73, and many looking to buy for less than $25.73. If XYZ is a highly liquid stock, you’d likely see many sell orders at $25.74 and buy orders at $25.72.

Tick size describes the smallest difference that can be displayed between buy and sell prices. In the above scenario, tick size is 1 cent because investors can see differences in buy and sell prices as small as a penny.

If the tick size for XYZ were 5 cents, then in the above scenario, the market would only be able to display price differences in 5-cent increments. That means that it would show something like buy orders at $25.70 and sell orders at $25.75.

Smaller tick sizes allow for more granular and accurate pricing for securities. If, for example, the tick size for stocks was $1, investors could only buy shares for prices such as $50, $51, and so on. They couldn’t offer prices like $50.27, even if that was a more accurate value for the security they wish to buy.

Example of Tick Size

Imagine a security that trades at $100. If the tick size is 5 cents, then the broker can only accept orders to buy or sell that security with prices in 5-cent increments from $100. That means it could accept orders at $99.95, $100.05, $100.10, $100.15, or $101, but not at $99.97 or $101.2 because those orders do not follow the tick-size requirement.


Different markets can have different tick sizes. That means tick sizes for stocks can differ from those for derivative contracts on commodities or even currencies.

Historically, stocks have had tick sizes of 1/16 or 1/32 of a dollar. Tick sizes are especially important when trading derivatives, such as futures. For example, an E-Mini S&P 500 futures contract has a tick size equal to one-quarter of an index point, which is valued at $50. So one tick is equal to $12.50, which is a significant difference in price.

Tick size also influences the number of ticks a security must move to produce a certain price change. For example, a stock with a tick size of one penny must move 10,000 ticks to produce a price change of $100, while an E-Mini S&P 500 futures contract must move just eight ticks to produce the same price change.

What It Means for Individual Investors

Individual investors should pay attention to the tick size of the securities they’re buying. If you know how many ticks a security typically moves during a period, knowing the tick size will let you determine the change in its value.

Frequently Asked Questions (FAQs)

What is tick size in stock trading?

Tick size is the smallest difference between the highest buy price and the lowest sell price that can be shown for an investment security. It determines the amount by which a share price can change in a transaction.

Why do tick sizes exist in investing?

Tick sizes are defined by stock exchanges and vary depending on the size of the financial instrument and requirements of the marketplace. Tick sizes provide optimal liquidity and tight bid-ask spreads in trading.

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. New York Stock Exchange. “Market Makers in Financial Markets: Their Role, How They Function, Why They Are Important, and the NYSE DMM Difference.” Pages 5, 7, and 14.

  2. Securities and Exchange Commission. “Assessment of the Plan to Implement a Tick Size Program.” Page 2.

  3. CME Group. “Tick Movements: Understanding How They Work.”

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