What is the definition of 'Tick' in financial terms?

The term 'Tick' in financial terms is defined as a measure of the minimum upward or downward movement in the price of a security. This concept is essential for understanding price movements in various markets, as it provides traders and investors with a standardized unit of measure for price fluctuations.

For instance, if a stock has a tick size of $0.01, the price must move at least that amount to constitute a significant change in price. This minimum movement is crucial for trading as it helps in setting limits for buy and sell orders and in determining the spread between the bid and ask price.

Understanding the tick size is fundamental for both traders and software algorithms that execute trades, as it impacts liquidity and pricing strategies in financial markets.