Tick value

What is Tick value in forex and CFD trading

Tick value is the standardized monetary amount gained or lost per unit of trading volume for the smallest possible price change, which is one tick, or one pipette. The Tick value matters for real trading decisions because it allows a trader to precisely quantify the cash risk and reward for every price movement, making it fundamental for calculating position size and setting stop-loss levels. For a standard lot of EUR/USD, the Tick value (per pipette) is typically $1.00. A trader can verify the specific Tick value for any instrument on their platform by inspecting the instrument’s contract specifications, which often list the Tick Value directly in the account currency, and can further explore related terms in our glossary.

Key facts about Tick value

• Forex Standard: For a standard 1.0 lot (100,000 units) of a currency pair where the quote currency is the USD (e.g., EUR/USD), the Tick value (per 0.00001 change) is USD $1.00.
• Calculation Dependency: The Tick value is derived from three primary variables: the instrument’s Tick Size, the Contract Size (lot size), and the current exchange rate, if currency conversion is required.
• Formula: The financial worth of a single tick for any instrument is calculated as: Tick Value = Tick Size × Contract Size × Exchange Rate Conversion (if necessary)
• Risk Management: Knowing the precise Tick value is essential for calculating the correct lot size (L) to risk a specific dollar amount (Rmax) over a defined stop distance (Pstop): L = Rmax / (Pstop × Pip Value (Tick Value) per Lot)
• Index Variation: For indices, the Tick value is often set as a fixed monetary amount per contract unit (e.g., $0.10 or $1.00) to simplify PnL calculation.
• Account Currency: The final Tick value is always expressed in the trader’s account currency, requiring conversion if the trade is in a different currency.

How Tick value works in forex and CFD trading

The Tick value is the bridge between a price movement on the chart and the monetary change in the trader’s equity, ensuring that every movement is financially quantifiable.

Calculation follows these steps:

1. Determine Tick Size: Identify the smallest unit of price movement for the instrument (e.g., EUR/USD is 0.00001).
2. Establish Contract Size: Ascertain the fixed Contract Size (e.g., 100,000 units for a standard lot).
3. Initial Tick Value Calculation: Multiply the Tick Size by the Contract Size to get the value in the instrument’s counter currency: Initial Value = Tick Size × Contract Size
4. Currency Conversion: If the Initial Value currency differs from the trader’s account currency (e.g., USD/JPY trade with a USD account), apply the current exchange rate: Tick Value (Account Currency) = Initial Value × Conversion Rate
5. PnL Quantification: The trading platform multiplies the number of ticks the price moves by the calculated Tick Value for the traded volume to update the real-time PnL.

Example of Tick value with a real trade

This example illustrates how the Tick value translates a large index movement into an exact cash PnL.

• Instrument: US30 CFD (Dow Jones Industrial Average CFD)
• Contract size: 1 unit of the index
• Tick size (minimum movement): 0.1 point
• Tick value (predefined by broker): $1.00 per 0.1 point move per contract
• Position size: 2.0 contracts
• Price move: 50 points (e.g., 35000.0 to 35050.0)

Total Ticks Moved: 50 points ÷ 0.1 tick size = 500 ticks
PnL per Tick (for 2.0 contracts): 2.0 contracts × $1.00/contract = $2.00
Total Gross Profit: 500 ticks × $2.00/tick = $1,000.00

Result: Given a fixed Tick value of $1.00 per 0.1 point move, trading 2.0 contracts across a 50 point price increase yielded a gross profit of $1,000.00.

How Tick value affects your cost and risk

The Tick value is the definitive factor for monetary risk sizing; a higher Tick value for the same volume means faster PnL accumulation, increasing both potential gain and potential loss.

Tick value compared with related concepts

Tick value vs Pip Value

Tick value is the monetary worth of the smallest price increment (the tick, or pipette), whereas Pip Value is the monetary worth of a standard one-pip movement, which is usually 10 times the Tick value for 5 decimal forex pricing.

Tick value vs Notional Value

Tick value represents the small, incremental cash change for the minimum price move and is key for PnL calculation, while Notional Value represents the total exposure of the trade in base currency, which is crucial for margin calculation.

Broker differences in Tick value across the industry

Differences in Tick value primarily occur in CFD instruments, where brokers can define custom Contract Sizes and Tick Sizes, and when dealing with non-USD account currencies due to varying conversion rates.

How to verify Tick value on your trading platform

To mechanically verify the exact Tick value for an instrument on a trading platform like MetaTrader 5 (MT5), follow these steps:

1. Select Instrument in Market Watch: Open the Market Watch window and ensure the instrument (e.g., XAU/USD) is selected.
2. Open Specifications Window: Right-click on the symbol and select Specification (or Properties in MT4).
3. Locate Tick Value Field: Scroll down to locate the field explicitly labeled Tick Value and note the amount, which is stated in the account currency (e.g., USD).
4. Cross-Verify Calculation Inputs: Note the Contract Size and the Tick Size from the same window; manually calculate Tick Size × Contract Size to cross-verify the Tick Value figure.
5. Check Conversion Rate (if applicable): If the instrument involves a third currency conversion (e.g., GBP/JPY with a USD account), check the prevailing USD/JPY conversion rate used in the calculation.
6. Test PnL Display: Place a small limit order; the platform’s order ticket may dynamically display the potential PnL impact of a one-pip or one-tick movement, providing a real-time check.
7. Sanity check: For a 1.0 lot EUR/USD trade in a USD account, the Tick Value (per pipette) should be exactly $1.00, and the Pip Value should be exactly $10.00.