The financial landscape is fraught with various intricate terms and concepts, of which 'plus tick' holds critical importance for investors, brokers, and traders. Diving into the nitty-gritty of the financial world, let's understand the Plus Tick Definition and its implications in the securities trading context.
A 'plus tick', also occasionally referred to as an 'uptick', indicates an upward change in the price of a security resulting from a single transaction or a batch of trades happening at the same price point. The price surge or plus tick denotes that the most recent transaction involving a security happened at a price higher than the preceding trade.
The reference point used to ascertain the upward change is relative and can be based on various factors. For instance, it could be the previous tick, the opening tick of the most recent trading period, or the closing price of the security from the preceding trading day. Therefore, it is essential to understand that a plus tick does not necessarily infer an overall price rise on a daily basis but points to an increase from a particular reference point.
Historically, the concept of a 'plus tick' was often seen in printed newspapers, marking the price change between the day being reported and the prior day. In these print market reports, a plus symbol "+" was placed before the price amount to indicate a rise in the price of a particular security.
A plus tick, however, is more than just a simple upward tick in the price of a security. It also provides crucial information about the security's market position at that given moment in time. A plus tick signifies that the security is not on a decline, meaning the most recent traded price is higher than the previous one, indicating a potential positive momentum or investor confidence.
To better comprehend the notion of a 'plus tick', one must familiarize themselves with the term 'zero plus tick'. A zero plus tick event kicks off with a plus tick or an uptick, where the traded price is higher than the previous one. This is followed by a trade where the price remains constant, indicating some stabilization at the upticked price. This series of events provides crucial insights into price trends and market stabilization.
Interestingly, the 'plus tick' terminology is highly relevant in discussions involving Uptick Rules applicable to short selling. These rules, enforced for 70 years, restricted short sellers from contributing to downward trends by insisting they could only short sell securities that had experienced at least an uptick. This rule was eliminated in 2007, but it was reintroduced in a new form in 2010.
The 'plus tick' is a valuable concept in securities trading, offering critical insights into price movement and market trends. By understanding this, traders and investors can make more informed decisions, adjusting their strategies based on the observed price trends and stabilization points. As we continue to grapple with increasingly volatile markets, it's essential to understand such concepts, acting as our compass to navigate the complex world of securities trading.
Summary
A plus tick is a transaction which occurs at a price higher than the transaction before it, also called an uptick, but often used in relation to a zero plus tick, which is explained below.
A plus tick is an indication that the security in question is not declining at a given moment in time. In other words, the most recent traded price of a security is higher than the price it traded at prior.
The term ‘uptick’ refers to the same thing, but "plus tick" is used in reference to the first part of a zero plus tick event: an uptick occurs in which the price traded is higher than the previous price, and then a trade occurs in which the price remains the same.
The second trade is called a zero plus uptick, and indicates some stabilization at the up-ticked price. All of this applies to conversations where Uptick Rules apply to short selling.
Uptick rules were in effect for 70 years, and prevented short sellers from adding pressure to downward trends by stipulating that they could only sell securities short which had experienced an uptick at least. The rule was dissolved in 2007, but then reinstated in a new form in 2010.