Tick Size and Value Trading Definitions
Each financial market has a minimum price fluctuation, called a tick. A tick is the smallest price movement an asset can make – called the tick size – and each tick of movement is worth a specific amount of money depending on the asset being traded, or the tick value.
The tick size is the minimum amount that the price of a futures contract can change. For example, the Euro FX futures (6E) market has a tick size of 0.00005, so its price will move in 0.00005 increments.
The S&P 500 E-mini (ES) futures contract has a tick value of 0.25, so it will move up or down in 0.25 increments. Crude Oil (CL) moves in 0.01 increments. Gold futures (GC) have a tick size 0.10 and natural gas futures (NG) move in 0.001 increments. Stocks have a tick size of 0.01.
To see the tick value of the specific futures contract you want to trade, find the contract on the CME Group website, select the appropriate contract, and then click on the Contract Specs tab. What you'll see as "The Minimum Price Fluctuation" is the tick size.
A market's tick value is the cash value of one tick (one minimum price movement). For example, the Euro FX futures market has a tick value of $6.25, which means that for every 0.00005 that the price moves up or down, the profit or loss of a trade would increase or decrease by $6.25, per contract.
In the S&P 500 E-mini futures contract the tick value is $12.50. For each 0.25 (one tick) of movement, your profit or loss will fluctuate by $12.50, per contract.
In gold futures the tick value is $10. For each 0.10 movement (one tick), your profit or loss will fluctuate by $10, per contract.
In crude oil futures the tick value is $10. In natural gas futures, the tick value is also $10, per contract.
These tick values are based on one contract. If you have a position of two, three, or more contracts, multiply the tick value by how many contracts you have. This will tell you how much you stand to make or lose on each tick of movement. For example, if you bought three contracts of the S&P 500 E-mini at 1623.25, and the price rises to 1624.25, the price went up four ticks, so you are making $12.50 x 3 contracts x 4 ticks = $150. If the price declines to 1620, then you have lost 13 ticks, so you are losing $12.50 x 3 contracts x -13 ticks = -$487.50.
Stocks have a tick value of $0.01, per stock. Since stocks typically trade in 100 share units (called a 'lot') for each cent the price moves, you stand to make or lose $1 on each 100 shares you own.
Why Tick Size and Tick Value Matter
Not knowing the tick size and tick value of the futures contract you are trading can result in taking position sizes that are way too big or small relative to your expectations.
Each contract (or stock) moves a different amount each day, relative to other futures contracts (or stocks). For example, the S&P 500 futures may move on average 70 ticks in a day, while the crude oil futures may move 150 ticks on average each day (note: volatility and average movements change over time, this is just an example). Even though the tick values are similar in both futures contract – $12.50 and $10 – respectively, one market moves much more than the other. Therefore, you would want to compensate for this when deciding how many contracts to trade.
How many contracts you trade is called position size, and is a very important factor when trading (see Determine Proper Position Size When Day Trading Futures).