What “tick size” is — the idea in plain language
Tick size is a market term for the smallest allowed change in price. In forex the word is often used interchangeably with “pip,” because currency quotes move in fixed small increments. When you see EUR/USD change from 1.1200 to 1.1201, that 0.0001 step is the smallest standard move for most major pairs and is what traders call a pip — effectively the tick size for that pair. For yen pairs the convention is different: USD/JPY quoted at 110.25 will typically move to 110.26 as the next standard step, so the “tick” there is 0.01.
Although the underlying markets are electronic and continuous, conventions (and the way your broker displays prices) set the practical increment you can trade in. Some platforms also show an extra decimal place (a pipette), which is one-tenth of a pip and gives finer price detail, but the market’s standard pip remains the usual reference point.
How tick size shows up in forex quotes and platforms
When you open a price feed you’ll usually see currency pairs quoted to four decimal places (or two for JPY pairs). That formatting reflects the common tick size: 0.0001 for most pairs, 0.01 for yen pairs. Many retail brokers add a fifth decimal (or third for JPY) for extra precision; that extra digit is a fractional pip or pipette. It helps scalpers and algorithmic systems see smaller moves, but profit/loss calculations still commonly use the standard pip unless you deliberately include pipettes in your math.
The practical consequence of these conventions is that orders placed with your broker must align with the displayed increments. If EUR/USD is priced at 1.1200 and the tick size is 0.0001 you cannot place a limit at 1.120045 on most platforms — you must use a price that aligns with the allowed increments (or the broker will round it).
Tick size versus tick (or pip) value — why the distinction matters
Tick size is the increment; tick (or pip) value is what that increment is worth in money for your trade size. Tick size is fixed by market convention (0.0001 for EUR/USD); tick value depends on position size and which currencies are involved.
For example, a standard lot in forex is 100,000 units of the base currency. If you buy one standard lot of EUR/USD and the pip (tick) is 0.0001, a one-pip move equals:
0.0001 × 100,000 = 10 USD
So one pip = $10 for a standard lot in EUR/USD. If you trade a micro lot (10,000 units), a pip equals $1. For USD/JPY the pip is 0.01. If you buy one standard lot of USD/JPY at 110.00, a one-pip move in JPY terms is 0.01 × 100,000 = 1,000 JPY, which converted back into USD is roughly 1,000 / 110 ≈ $9.09 per pip (the exact USD equivalent depends on the exchange rate).
Those simple calculations show why traders must know both the tick size (the increment) and the pip value (the monetary effect for their lot size) before sizing positions or setting stop-loss and take-profit levels.
Why tick size matters for spreads, execution and strategy
Tick size sets a floor for how narrow the spread can be. If the market’s smallest step is one pip, the bid–ask spread can’t be smaller than that step unless providers quote at the same price level. That has several practical effects on your trading.
Smaller tick sizes (fine increments) generally allow tighter nominal spreads. Tighter spreads reduce apparent transaction cost, which helps scalpers and short-term traders. But very small increments can also encourage rapid price competition and can reduce visible depth at each price level, which may increase the chance of slippage on large orders.
Larger tick sizes make each price step more meaningful. In less liquid currency pairs or times of low activity the next available price may be several pips away, so the effective cost to cross the spread is higher. Day traders and swing traders should account for that when planning entries and exits.
Strategy adjustments traders commonly make because of tick-size effects include using limit orders to avoid paying wide spreads, widening stop-losses in pairs with larger increments to avoid being stopped out by normal ticks, and reducing position size if the pip value is high relative to account risk.
Practical examples you can use right away
If you trade one standard lot (100,000) EUR/USD and expect the market to move 25 pips in your favour, the nominal profit is 25 × $10 = $250. If you traded one micro lot (10,000) and the move is the same 25 pips, profit is 25 × $1 = $25. That illustrates how pip value scales with position size while tick size stays fixed.
Consider USD/JPY at 110.00 with a tick size of 0.01. If your trade size is one standard lot, a 20‑pip move equals 20 × (0.01 × 100,000) = 20 × 1,000 JPY = 20,000 JPY. Converted at 110, that’s about 181.82 USD. The same price movement measured in pips has a different dollar impact than EUR/USD because the quote currency and conversion matter.
If your broker shows five decimals for EUR/USD and you see a move from 1.12003 to 1.12013, that’s a ten‑pipette move but only one pip in standard terms. Some automated strategies or very-short-term scalpers will use those pipettes for order placement; most retail risk calculations and trade sizing use full pips.
Tick data and tick charts — a note for active traders
Tick data records each trade or quote change, not fixed time intervals. A tick chart plots price bars after a set number of ticks (for example, every 250 trades). Traders who care about order flow or microstructure use tick charts because they show activity bursts more clearly than time-based charts. That level of detail can help with very short-term timing, but it also increases noise and requires faster decision-making and execution systems.
Risks and caveats
Trading foreign exchange involves leverage and can result in losses greater than your initial deposit. Tick size and pip value affect how quickly profits or losses accumulate; a small number of ticks can translate into a large dollar change if your position is large. Broker conventions (how prices are quoted and rounded), platform limitations, and spreads can alter theoretical outcomes, so always check how your specific broker displays prices and calculates pip values. This article is educational and not personalised financial advice. Consider paper trading and calculate pip values, spread costs and position sizes before risking real capital.
Key takeaways
- Tick size in forex usually means the pip: 0.0001 for most pairs and 0.01 for JPY pairs; some brokers show fractional pips (pipettes).
- Tick (or pip) value depends on position size and the currencies involved; a standard lot in EUR/USD makes one pip worth about $10.
- Tick size influences spreads, liquidity and execution; adapt order types, stop levels and position size to the tick environment.
- Trading carries risk; understand how ticks translate into real monetary exposure for your account before trading.
References
- https://appreciatewealth.com/blog/trading-ticks-a-beginners-guide
- https://www.dbrownconsulting.net/terms/t/Tick-Size
- https://www.investopedia.com/terms/t/tick-size.asp
- https://bookmap.com/blog/maximizing-profits-how-tick-size-impacts-your-trading-strategies
- https://www.luxalgo.com/blog/pips-vs-ticks-key-differences-every-forex-trader-must-know/
- https://www.tastylive.com/concepts-strategies/pips-ticks-bips