What is the Difference Between a Tick and a Pip?

By ,
What is the Difference Between a Tick and a Pip?
Source: Flickr/Helga Weber
Pips and ticks are easily mixed up by first-time currency traders – especially if you are coming from a stock market background. A tick in currency trading, however, is very different from a tick in stock trading.

A tick in the stock world is the same thing as a forex pip – the minimum price movement a security can make. A pip is the minimum price movement a currency pair can make or, put more accurately, a pip is 1/100th of 1 percent.

A tick in forex is the smallest unit of time between two trades. There is no set unit of time for a tick, as it depends on how many trades are being executed. If a currency pair is seeing heavy trading, a tick may be measured in tenths of a second. If a currency pair is thinly traded, a single tick can last minutes or hours. In other words, ticks are relative measures of time whereas pips are absolute measures of value.

Forex traders use tick charts to keep an eye on the price action and chart patterns that may otherwise be lost on traditional charts when the volume of trading spikes. The forex version of tick charts have actually made it back to the stock market, making the definition of a tick even more confusing in a stock context. (New to the forex market? Check out A Beginner's Guide to the Forex Market.)

Stay on top of the currency markets with our newsletters by subscribing to ForexDictionary's free newsletters.