What Is Tick?
A tick is the minimum price increment at which an asset can trade on a given exchange. For Bitcoin on most exchanges, the tick size is $0.01 — price can move by $0.01 but not by $0.005. Tick size varies by asset and exchange, and it determines the granularity of the order book.
How Tick Works
Tick size matters for several reasons: it defines the minimum possible spread (which can't be smaller than one tick), it affects the precision of limit orders, and it impacts the profitability of market-making strategies. Smaller tick sizes allow tighter spreads and more precise pricing, while larger tick sizes can create artificial spread floors.
Why It Matters for Traders
For most retail traders, tick size is relevant when placing precise limit orders and calculating exact position sizes. When your stop-loss distance is very small (just a few ticks), the tick size directly impacts your risk calculation. Understanding tick increments ensures you don't place invalid orders and can accurately model trading costs.