What is a Zero Plus Tick?
Let me explain what a zero plus tick or zero uptick really means. It's a security trade executed at the same price as the one right before it, but higher than the last trade that had a different price. For instance, if trades happen at $10, then $10.01, and then $10.01 again, that last one is a zero plus tick because it matches the previous but beats the one before.
You see this term applied to stocks, bonds, commodities, and other assets, but it's most common with listed equities. The flip side is a zero minus tick, which works the opposite way.
Key Aspects of Zero Upticks
A zero uptick happens when an asset trades at the same price as the trade before it, but higher than the one prior to that. Short sellers used these a lot to comply with the old uptick rule. Up until 2007, the SEC required that stocks could only be shorted on an uptick or zero plus tick to avoid destabilizing the market. Now, as of 2010, there's an alternative rule: if a stock drops more than 10% in a day, you can only short on an uptick, but otherwise, short freely.
Understanding Zero Plus Ticks in Depth
Think of a zero uptick as the stock price moving up and then holding steady for a bit. That's why the SEC had the uptick rule for over 70 years, allowing shorts only on upticks or zero plus ticks, not downticks. This was to keep traders from piling on and crashing a stock's price. Before the rule, groups would team up, short sell heavily, and spark panic selling to drive prices down further.
People thought shorting on downticks might have contributed to the 1929 crash, based on investigations from 1937. The rule started in 1938 and got lifted in 2007 when the SEC figured markets were mature enough without it, especially with decimal pricing. But after the 2008 crisis, they brought back an alternative in 2010: if a stock falls 10% or more, short only on upticks, and that lasts through the next day.
Example of a Zero Plus Tick
Suppose stock ABC climbs from $45 to $50 with upticks, then trades at $50 again. That's a zero uptick. Take Company XYZ with a bid at $273.36 and offer at $273.37. Trades hit both, then another at $273.37 is an uptick, and a follow-up at $273.37 is a zero plus tick.
Normally, this doesn't change much, but if the stock has dropped 10% from the prior close, upticks matter. Under the 2010 rule, you can only short on an uptick, meaning you hit the offer side, not the bid.
What About Zero Downticks?
A zero downtick is the reverse: same price as the previous trade but lower than the one before that. This gives you clues on short-term direction and momentum, useful for short sellers or spotting support levels. It got attention after the uptick rule ended in 2007. It might not scream bearish, but it could show a pause in upward moves or shifting sentiment.
The Uptick Rule Explained
The uptick rule was an old SEC regulation requiring short sales at a price higher than the previous trade, from the 1934 Act and implemented in 1938. It stopped short sellers from fueling sharp drops. Short sellers find these rules annoying since they have to wait for stabilization. Some say it cuts liquidity, but shorting adds demand by borrowing shares and keeps prices from inflating on hype.
Why Zero Upticks Matter to You
You should pay attention to zero upticks because they influence your strategies. They signal short-term momentum—buyers stepping in at the same price shows sustained interest. If you're shorting, under old rules, you couldn't start on a zero uptick unless it qualified. Frequent zero upticks mean high liquidity with tight spreads and smooth moves; rare ones suggest volatility and wider spreads.
In technical analysis, they help with charts to spot support or resistance. Patterns of zero upticks reveal market behavior. Remember, the zero-uptick rule limits shorts to prevent too much downward pressure, allowing them only on zero or positive upticks.
Related Concepts
A tick is the smallest price move for a security, like $0.01 for U.S. stocks. Technical analysis looks at price and volume trends to spot opportunities, focusing on history rather than fundamentals. Short selling means borrowing and selling shares, hoping to buy back cheaper for profit, but it's risky if prices rise.
The Bottom Line
In summary, a zero uptick is when a trade matches the previous price but exceeds the one before, offering insights into momentum, liquidity, and behavior. Recognizing them sharpens your technical analysis, guides short-selling, and gives a deeper view of price action.
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