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What is a Zero Uptick?

Article Details
  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 17 October 2018
  • Copyright Protected:
    2003-2018
    Conjecture Corporation
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Sometimes referred to as a zero-plus tick, the zero uptick involves the execution of a transaction at the same price as the last completed transaction. However, the price on these two recent transactions will be higher than the price involved with the two transactions that immediately preceded them. While the process may be somewhat difficult to explain, the actual execution involves a simple set of progressive steps.

Because the zero uptick involves the execution of two sets of two transactions, the point of zero upticks is to group the transactions and set the transaction price for each set at a rate that will result in profiting from a decline in price. As an example, if the first and second transactions in the series are executed at a rate of 25, then the next set of two transactions will need to take place at a higher rate. The rate for the second set of transactions does not have to be significantly higher in order for the uptick to work. Even a transaction price of 26 for the second set of transactions will work well, depending on the specific market conditions.

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It should be noted that the implementation of a zero uptick might not work equally well in all investment markets. Since the process does involve applying a short to the transaction sequence, there may also be some restrictions on the use of the technique. One market where there are few restrictions on the use of shorts is in the currency market. A short is often utilized in the Forex market, and with an appreciable degree of success.

The zero uptick is the opposite of a zero-minus tick, in which the sequence of the use of prices is descending rather than ascending. However, the end result of both techniques can be the same, depending on the set of circumstances that currently prevail in the particular market. While the approach is relatively easy to master, the same level of care should be used in applying the zero uptick that would be used with any market strategy.

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