Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Zero Downtick

What it is:

Also called a zero minus tick, a zero downtick is a trade that occurs at the same price as the trade preceding it but lower than the last trade at a different price. A zero downtick is the opposite of a zero plus tick.

How it works (Example):

Let's say the first trade of the day for Company XYZ stock is 1,000 shares at $20 per share. The very next trade is 2,500 shares at $18. The third trade is 1,500 shares at $18 (the same price). The third trade is called a zero downtick because that $18 trade is the same price as the previous trade but lower than the last trade that occurred at a different price (the $20 trade).

Although the term is usually used in reference to stocks, it can also apply to bonds, commodities and other traded securities.

Why it Matters:

A zero downtick suggests that a stock is trending down and staying there. The SEC used to disallow shorting stocks on downticks in order to prevent traders from jumping on the bandwagon to destabilize a stock's price.