Web Trader MT5
A down tick refers to a transaction that occurs at a price lower than the immediately preceding trade in the same security. It is the smallest possible unit of bearish price movement; a single trade that nudged the price downward, even if only by a fraction. The concept became particularly important in the context of short-selling regulation.
For much of the twentieth century, US rules required that short sales could only be executed on an uptick or a zero-plus tick; a rule designed to prevent short sellers from piling onto a falling stock and accelerating its decline.
That uptick rule was abolished in 2007 and partially reinstated in modified form after the 2008 crisis.
Down ticks are also used in market microstructure analysis, where the ratio of up ticks to down ticks over a period can offer insight into the underlying buying and selling pressure in a stock.
Example: A stock is trading at $45.20. The next trade goes through at $45.18. That is a downtick; a small move, almost invisible in isolation, but when downticks begin to consistently outnumber upticks throughout a session, it tells a story about who is in control of the tape.
