What is a Tick in Forex Trading?
Quick Answer: A tick is the smallest possible price movement of a trading instrument. In forex, a tick equals a pipette (the 5th decimal place for most pairs, or 3rd decimal for JPY pairs). It represents the minimum price fluctuation brokers can quote.
Understanding Ticks in Forex
A tick is the smallest possible price movement in a currency pair. While a pip is typically the fourth decimal place (or second for JPY pairs), a tick represents an even finer measurement - it's essentially the same as a pipette.
Tick vs Pip vs Pipette
Understanding the hierarchy of price movements:
| Measurement | EUR/USD Example | Value |
|---|---|---|
| Tick/Pipette | 1.10500 → 1.10501 | Smallest movement (5th decimal) |
| Pip | 1.1050 → 1.1051 | 10 ticks (4th decimal) |
| Point | 1.10 → 1.11 | 100 pips or 1,000 ticks |
Why Ticks Matter
Ticks are particularly important for:
- Scalpers - Trading very small movements requires tick-level precision
- High-frequency trading - Algorithms operate at tick level
- Spread comparison - Brokers may advertise spreads in ticks (e.g., "8 tick spread" = 0.8 pips)
- Precise order execution - Better fills when trading large positions
Tick Value Calculation
For most currency pairs quoted to 5 decimals:
Standard Lot (100,000 units):
- 1 tick (pipette) = $1
- 10 ticks (1 pip) = $10
Micro Lot (1,000 units):
- 1 tick (pipette) = $0.01
- 10 ticks (1 pip) = $0.10
Tick Charts vs Time Charts
Some traders use tick charts instead of time-based charts:
- Time charts - New candle every minute, hour, day (standard)
- Tick charts - New candle after X number of trades/ticks (e.g., 100-tick chart)
- Benefit - Tick charts normalize volatility, showing more bars during active periods
- Use case - Popular for futures and high-frequency forex strategies
💡 Practical Note
For most retail forex traders, the terms "tick" and "pipette" are interchangeable - both refer to 1/10th of a pip. Unless you're scalping on very small timeframes or comparing broker spreads precisely, you can think in pips rather than ticks for simplicity.
Learn More About Forex Trading
Now that you understand tick, explore our comprehensive guides: