Tick value

What tick value means

A tick is the smallest price increment a futures contract is allowed to move. Tick value is the amount of money that one such step is worth for one contract. Together, tick size and tick value convert a price chart into money, which is essential when you trade instruments whose contract sizes differ.

For example, an equity index future might move in steps of 0.25 index points, and each step might be worth a fixed amount of currency for one contract. A crude oil future might move in steps of 0.01 and have a much larger value per step. The exchange sets both numbers in the contract specification, and they stay the same unless the exchange amends the contract.

The idea is used for futures, and similar logic applies to CFDs and forex through pip value or point value. In futures trading the phrase "tick value" is the standard way to talk about profit and loss per minimum move.

How it works

Three quantities are linked.

• Tick size: the smallest permitted price change, in price units.
• Contract multiplier (or contract size): the amount of underlying per contract, or the money per index point.
• Tick value = tick size × contract multiplier.

The profit or loss on a trade is then the number of ticks the price moved, multiplied by the tick value, multiplied by the number of contracts, with the sign depending on direction.

Profit or loss = ticks moved × tick value × contracts.

If you hold a long position and the price rises by 8 ticks, you gain 8 times the tick value for each contract. If you are short and price rises 8 ticks, you lose the same amount. Commission, exchange fees and clearing fees are charged separately per contract and count as costs on top.

Not every instrument moves in the smallest tick. Some contracts have different minimum steps in different price ranges or for spread orders, and the platform specification lists them.

A worked example

The values are illustrative and not copied from any exchange. A fictional index future has a tick size of 0.50 points and a multiplier of 10 currency units per point.

• Tick value = 0.50 × 10 = 5.00 per tick per contract

You buy 3 contracts at 4,000.00 and sell them at 4,006.50.

• Price move: 4,006.50 - 4,000.00 = 6.50 points
• Number of ticks: 6.50 ÷ 0.50 = 13 ticks
• Gross profit: 13 × 5.00 × 3 = 195.00

Costs: suppose total fees are 2.00 per contract per side.

• Fees: 2.00 × 3 contracts × 2 sides = 12.00
• Net profit: 195.00 - 12.00 = 183.00

Now use tick value to size a stop. You want to risk at most 150 on this trade with 3 contracts.

• Risk per contract: 150 ÷ 3 = 50.00
• Ticks allowed: 50.00 ÷ 5.00 = 10 ticks, which is 5.0 points

So the stop must be no more than 5 points from entry, before allowing for slippage. Without the tick value the calculation would not be possible.

Why it matters

Tick value makes risk concrete. Two contracts can both quote a price like 100 and still have entirely different money moves per tick. Knowing the tick value lets you compare instruments on the same basis, size positions, and set stop and target distances in money terms.

It also exposes the cost of trading. The spread between bid and ask is often one tick for liquid futures, so one tick is the minimum round-trip cost of crossing the spread. Together with commission, that tells you how much the price has to move before a trade breaks even.

For retail traders, tick value differs between full-size contracts and micro contracts. Micros are a fraction of the size and have a proportionally smaller tick value, which can make position sizing more flexible.

How to use it in practice

1. Open the contract specification on the exchange or broker website and note tick size, multiplier and tick value.
2. Check the currency in which the tick value is paid, because the account currency may differ and conversion costs may apply.
3. Convert your planned stop distance into ticks and then into money per contract.
4. Divide your maximum acceptable loss by the money risk per contract to find the number of contracts.
5. Add commissions and fees per contract per side to the break-even estimate.
6. Compare the standard contract with the micro version if your account is small.
7. Recheck specifications when contracts roll to a new expiry in case of changes.

Common mistakes and misconceptions

• Mixing up tick and point. A point can be several ticks.
• Using the tick value of a similar contract. Mini, micro and full versions all differ.
• Forgetting the currency of the tick value.
• Ignoring the fees per contract when computing the minimum profitable move.
• Assuming tick value is the same in CFDs on futures. CFD providers define their own point values.
• Thinking a larger tick size always means a wider spread. It sets the minimum, and liquid contracts often trade at one tick.

Risks and limitations

Futures are leveraged, so a small number of ticks can represent a large share of the margin deposited. Losses can exceed the initial margin. Tick-based calculations assume fills at the price you want; real fills may skip several ticks in fast markets. Exchanges can change contract specifications, and margin requirements can rise quickly in volatile periods. The figures in this article are illustrative only.

How Brokeli looks at it

We examine whether a broker provides futures, what contract specifications it publishes, and what the commission and exchange fees per contract are. Those items come from published research snapshots, so tick value and cost per round trip can be compared on one basis. Availability of futures for retail clients depends on country and entity.