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Trading Basics: Tick Value

Every futures contract traded on the market has a defined tick size or the smallest price it can move either up or down. Tick value is different for every market and is one of the most important things to pay attention to when deciding which market to trade as well as defining your trading plan.

You can find the tick value usually in the contract specification under "minimum price fluctuation" this will tell you the price of the tick and how the exchange measures this price.

When you place an order in the market, you will be entered in at a specific tick price. How much profit you make depends on the cost of each tick and which way the market goes. If you buy a futures contract, you want the market to move higher in ticks so as to increase the price, with each tick that goes higher in price the more money you make.

For example: Let’s say you enter the E-Mini Nasdaq at the tick level of 7432.50 with a buy order. The E-Mini Nasdaq has a tick size of $5.00, so we know with each tick upwards the price for your E-Mini Nasdaq contract will go up $5.00. If you entered the market with a buy contract at 7432.50 and you sold your contract at 7433.50 the market has moved 10 ticks which means you made $50.00 in profit.

When you are trading with multiple contracts, you are essentially multiplying the tick value by the number of contracts being traded. For example, if your trading with two contracts on the E-Mini Nasdaq each tick the market moves away from your position gives you either $10.00 profit or loss depending on the direction.

In this example, we are showing the E-Mini Nasdaq with different Contract Sizes.

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