An uptick is any new price quote that is higher than the preceding quote. An asset experiences an uptick only when enough buy orders are placed to drive the price of the asset higher. Conversely, a downtick is a lower quote.
Uptick is used to express several different terms in trading.
- Zero upticks – describes when a trade is executed at a price that is the same as the trade immediately preceding it
- Uptick volume – denotes the number of trades enacted when the asset’s price is rising
- Uptick rule – is an act by the US Security and Exchange Commission that required short sells to only be made on an uptick so short sellers would not put too much pressure on the asset by selling it while on a downtick
What is the alternate uptick rule?
The alternate uptick rule states that short-selling a stock that has already declined by at least 10% can only be done on an uptick. The new rule was introduced by the Security and Exchange Commission (SEC) in 2010 and applies to stock trading in the US.
Now, when a stock’s price has fallen by at least 10%, the alternate uptick rule goes into effect for the remainder of the trading session and the full next day. Short sellers can then only enter trades at or above the stock’s bid price.