Downticks

A downtick is a term used in financial markets to describe a trade that occurs at a price lower than the last recorded trade price. It reflects a downward price movement from the most recent transaction rather than from the prior closing price.

Downticks are determined by comparing consecutive trades: if the price of a new trade is lower than the price of the immediately previous trade, the new trade is a downtick. For example, if the last trade printed at 50.00 and the next trade prints at 49.75, that transaction is a downtick of 0.25. Downticks, along with upticks and zero- or even-trades, are commonly shown in real-time data feeds and tick charts.

In market analysis, downticks help illustrate short-term price pressure and momentum. Analysts and traders may count downticks over a period to gauge selling pressure, or compare the frequency of downticks to upticks as a simple sentiment indicator. Some trading strategies and data feeds also categorize price actions into upticks, downticks, or unchanged ticks to study microstructure and liquidity.

Contextual use varies by market. Downticks are part of the broader concept of price ticks, which track direction and magnitude of each trade. While not a forecast by themselves, patterns of downticks can contribute to short-term trading decisions, liquidity assessments, and the interpretation of price action in relation to upticks.

See also: uptick, tick, market microstructure.