Points, Ticks, and Pips - Trading Definitions

How prices move, depending on the market traded

Points, ticks and pips trading definitions
djgunner / Getty Images

Points, ticks, and pips are all ways of describing an amount of price change. The term that is used depends upon the market being discussed, and sometimes on the amount of price change in question.

Points - A point is the largest of the three terms, and is the smallest possible price change (1) on the left side of the decimal point. For example, the S&P 500 E-Mini (ES) futures market might experience a price change from 1314.00 to 1315.00, which would be a price change of one point.

If Crude Oil (CL) moves from 68.00 to 69.00, that is one point. A point is composed of ticks, which are the price movements that occur on the right side of the decimal place.

Ticks - A tick is the smallest possible price change for the market in question, and may be anywhere on the right side of the decimal point. Markets have different tick sizes. Stocks have a tick size of $0.01, as they move in $0.01 increments. Futures markets also move in ticks, and the amount of the tick (called Tick Size) varies by the futures contract. The S&P 500 E-Mini (ES) has a tick size of 0.25, crude oil (CL) has a tick size 0.01, and gold futures (GC) have a tick size of 0.10. 

To see the tick value of a futures contract, find the contract on the CME Group website, click on the appropriate contract, and then click on the Contract Specs tab.

Points are composed of ticks. A point is worth one, or one increment on the left side of the decimal place.

How many ticks go into a point? However many ticks add up to one. In the S&P 500 E-mini, you have four ticks to a point, in gold futures you have 10 ticks to a point.

How much money a tick of movement is worth (called Tick Value) depends on the futures contract being traded.

Pips - A pip is the smallest movement (1) that occurs at the fourth decimal place in (most) forex pairs.

For example, if the EUR/USD forex pair moves from 1.1608 to 1.1609, that is one pip of movement. For forex pairs that contain the Japanese yen (JPY), one pip of movement occurs at the second decimal place. For example, if the USD/JPY moves from 109.16 to 109.15, that is one pip of movement. 

Forex brokers now offer fractional pip pricing. This means a fifth decimal place will often be quoted. For example, if the price of the EUR/USD moves from 1.08085 to 1.08095, that is one pip of movement. If the price moves from 1.08085 to 1.08090, then it only moved half a pip. There are 10 fractional pips to a whole pip.

How much money a pip of movement is worth (called Pip Value) depends on the forex pair being traded.

Which Markets Use Which Term?

Points and ticks are used in the futures market, when discussing how far a price has or might move. Pips are used in the forex market for the same purpose. Stock traders may also use the term "points" when talking about how many dollars a stock has moved. If they bought at $5, and the stock is now at $8, they may say they are "Up three points."

The term tick is also used in another context, as it relates to tick charts. A tick chart tracks every transaction (or series of transactions), so in this sense, a tick represents a transaction.

Therefore, when someone refers to a tick chart, they are talking about a chart type that logs each transaction and plots it on a price and time graph; they aren't talking necessarily talking about tick price movements (as defined above).

Final Word on Points, Ticks and Pips

Points, ticks and pips are all ways of describing a price move. In the forex market, the term "pip" is used, representing an incremental move at the fourth decimal place (or second decimal place when the JPY is involved). Points and ticks are used more in the futures markets, with a tick representing the smallest price move on the right side of the decimal place, and a point representing the smallest price move on the left side of the decimal place. Points are composed of ticks. The tick value, and how many ticks are in a point vary by the futures contract being traded.