What is a tick?

Hello,

Just curious as to what a tick represents on forex.

If on other markets, a tick represents a transaction of a buyer match a seller, how does it work in forex when there is no central exchange?

If millions of people are buying and selling all over the world, do all of these transactions at that price and at that time get combined to make one tick? And the volume of the trade at that price represents the combined mob rather than just one buyer and sellers purchase or sale at that price?

I'm confused

I dowloaded 6 years of oanda tick data and am wondering why there is only one tick every second or so.

Any insight into the nature of ticks would be appreciated.

a tick is a blood-sucking parasite. much like a trader? j/k.

the closest match to a tick is the forex pip.

a tick is not when a buyer and seller are matched. a tick is when the last traded price is different to the last... e.g. person 1 sells at market to the buyer sitting in the books, then person 2 decides to market buy at the lowest seller sitting in the books. as buyers sit below sellers this type of scenario would show the last transaction price at the highest bidders price then ticking up when the market buy transacts at the lowest sellers price (which sits above the highest bidder. i.e. spread). again, a tick is when the last transaction is at a price different to the one before it. this could be a buyer in the books being matched or a seller in the books being matched. the order book can change a million times and the highest bid and lowest sell change and change and change... but this is not a tick. only when a transaction occurs and the price is different to the previous does a 'tick' occur.

forex pip is not the same though since it's a decentralized market. the concept is similar though in the way pips are usually discussed (gained / lost x pips etc). it's simply when the price levels change, but in reference to the buy/sell line relevant to your situation.

e.g. i place a forex market buy... as this is retail forex my buy price is whatever the ask price currently is. due to the spread between the current bid and ask, and that when i offload my position i will be selling at whatever that current bid price is, i am immediately down the value of the spread in pips. let's say the spread is 10 pips, that makes my position down 10 pips (i.e. 10 pips in the red).

notice how in this context buying or selling makes no difference as to how i relate to how many pips i have gained or lost in this position? it's being used relatively.

if simply discussing chart prices you could say price went up x pips, or down y pips, and this is obviously not relative to anything but the chart itself.

e.g. eur/usd bid was at 1.0000 the ask was at 1.0001, and i buy (at the ask). i'm now down 1 pip (as eur/usd moves by increments of 0.0001). but wait a second, yay, after a minute or so the price moves up by 5 pips and the BID price is now 1.0005 and the ask is at 1.0006. the price increased 5 pips and my position is now up 4 pips (i bought at the ask of 1.0001, and could now sell at the bid of 1.0005).

/ramble

hopefully someone will pick the flaws in what i wrote. blame it on the rum!

edit : crap, forgot to add... also keep in mind some brokers represent their prices in PIPETTES. that's an extra decimal place to what used to be the standard pricing on whatever currency cross you like. so while eur/usd moves in 0.0001 increments a broker might actually show you prices to an extra decimal place and therefore show eur/usd pricing increments of 0.00001. 1 pip = 10 pipettes. it's just another way for brokers to confuse and confuddle and mask the real story behind price movement.

edit 2 : sorry. also to answer your question about why your oanda data shows pricing ticking only about once a second... well that is because oanda's quoted prices only changed that fast. wherever they get their price feeds from caused their prices to change roughly once a second. that's actually not too bad for some times of the year. eur/usd at it's busy times on my broker shows volume (ticks per candle) reaching towards 200 a minute at it's busiest times, whilst in the dead of night in the dreariest slowest parts of the trading year you'd be lucky to see a tick a minute. you might do well to google and search around for how brokers quote their prices and how the decentralized market moves in somewhat sync. terms like arbitrage might also help.

edit 3 : blargh. further to answer your question. consider forex volume to represent how many ticks have occurred, and consider a forex tick (in pip values) as a change in the order book of the highest bidder and lowest seller. since retail forex does not give you a transaction history you don't know how many transactions at whatever price level has occurred, you are only aware of when the available pricing changes.

in a centralized market (stocks etc) you could have 100 units sitting on the bid and 100 units sitting on the ask, and you get a few units sold to the bidder, then a few to the seller, then a few to the bidder, and so on, and in this way you watch price tick up and down... a true tick. in forex, this all happens away from our prying eyes, and only when the banks decide that no one wants the current bid or sell price and they change it do we see on our platforms a change in price, a tick (in of x pips) and the volume for the current candle/bar increments by 1.

ok no more edits.

sorry about all the edits. i will only add posts from now if anything further comes to mind.

nubcake, may I summarize what you wrote?

A tick is when the price changes.

it seems that yes, yes you can :nerd:

By the way, and it's none of my business, but your use of English sounds American and you posted at 6:09 and 7:14 EST this morning. Are you still feeling the effects of last night's rum or do you normally get such an early start on things?

australian. 10.23pm watching Shooter on tv (nothing else on). op bundy rum is almost finished on this stubby.

thra anadda shrimp on da barby maaaaaate.

Do you eat vegemite sandwiches with that shrimp?

http://farm4.static.flickr.com/3107/...78929614_o.jpg

It does, thats me

He's right. There's not much reason for a roo stand by the opera house, since it's mainly populated by stranded foreigners. The closests roos are just around the bay near the canoe wharves. I usually catch a roo to work with my neighbour, after we've paddled across the harbour on our tree stump. At dusk it gets pretty dodgy on the harbour, with all the sharks and all, so they built the bridge for us to walk home.

A TICK is the least cost fluctuation of a icon available for trading. For example if the EUR/USD moves from 1.36543 to 1.36547 this is 4 TICK, 10 ticks in Forex equals 1 pip (applicable to Forex Majors)

hey hallie... there might be an exception to that ...... in metatrader terms, which many of us use here, there is a slight difference.....

ticks are not specificaly tied to trades, pips or pipettes......

in other words, you could have 100 ticks, or volume of 100, and not have a single price change or even a single trade have been placed.....

also you could have a volume of 1, or 1 tick, and have the price move 500 pips and not have a single trade placed.....

here, ticks are related to the volume of marketinfo changes......

it's small matter, but might be worth knowing.....h

Agree with Hayseed,

I want to be brief so we don't lose anyone here:

Using Hayseed's example, but using pips instead of ticks: EUR/USD moves from 1.36543 to 1.36563

is equal to 2 pips ( or 20 ticks ). Pip = percentage in price.

I see pips used most of the time with the currencies, and ticks as the smallest unit of change with the stock indexes.

These small units is what the layman usually trades, institutions trade the actual large lot value ( out of reach for the everyday man's account !).

Cheers, Gk.

GreatWest confuses ticks with points.

A pip is a measure of pricechange. If price was 1,25670 and becomes 1,25680, it has changed 10 points or 1 pip. A pip is 0,01 cents. A point is the smallest amount possible, so 0,00001. (Some currencies have other pip sizes, like the Yen).

A tick occurs at each price shift or at each trade made at the floor. This can be an Ask price shift or a Buy price shift or both.

All the ticks together in one candle stick are the volume of that candle stick. This volume tells nothing about the size of the price shift, nor about the traded volume, only about the amount of price changes.

So if volume is high, lots of ticks in one candle stick and thus ticks like a machine gun. In that case many traders are in for a trade. More about this? Look for Bill Williams and his MFI indicator.