In plain English
What Tick size means
Tick size is the smallest step the quote can take. If the tick size is 0.01, prices can move from 10.00 to 10.01, but not to 10.005. The monetary effect of one tick depends on the contract size, so a larger contract can make the same tick much more valuable.
Why it matters
Tick size shapes pricing granularity, spread display, and how precisely stops or limits can be placed. It also affects the minimum possible move a trader can capture or lose on a position. For CFDs, the product’s quoted tick size is part of the contract specification.
Example
A share CFD quoted to two decimals has a tick size of 0.01. If the contract size is 1 share, a one-tick move changes the position by 0.01 currency units. If the contract size is 100 shares, the same one-tick move is worth 1.00. This is simplified.
Quick answers
Common questions
Is tick size set by the broker?+
Sometimes, but it may also be inherited from an exchange or from the provider’s pricing model.
Why does tick size matter for stop orders?+
Because stops and limits can usually only be placed at valid price increments.
Sources