When the sale of a security occurs on an exchange, the transaction is said to be "a tick." Here's the history of the Tick and why traders keep an eye on it.

The term tick comes from the days when every transaction on the New York Stock Exchange was recorded by hand and sent out by telegraph to a system of connected "stock tickers." Anyone willing to install the necessary cable into their office could subscribe to the New York Stock Exchange ticker service. As each transaction occurred on the floor a clerk entered the data into the telegraph system. The transaction data, appearing in almost identical form to current stock quotes, was sent out over the telegraph system and printed on a paper tape machine. The "ticker" machine, enclosed in a glass container and looking like watchworks in an inverted test tube, spit out long reams of narrow paper tape, providing a record of every sale.

Each time a transaction occurred the machine made a ticking sound as it printed the number of shares and the price. The stream of data you see today, on the bottom of TV screens and in Internet java applets, has the ticker machine as its direct descendant.

Each transaction is therefore called a "tick." There are four additional useful concepts based on the tick: "the uptick," "the market tick," "the closing tick," and "average size tick."

A sale that occurs at a price higher than the most recent previous sale is said to be an "uptick." A sale occurring at a lower price is a "downtick."

Short sales of stock may only occur after an uptick. When you place an order for a short sale the transaction can't be executed until after an uptick occurs. It is not uncommon, when a stock price falls, for many transactions to go by before an uptick occurs.

Often just called the tick, the market tick refers the sum total of all upticks and downticks, for all stocks, updated continually throughout the day. For example, if the last trade for half of all stocks was an uptick, and the last trade for all of the other stocks was a downtick, the total market tick is zero, or "0." An uptick, regardless of its size, counts as "1" and a downtick counts as "-1." Unchanged stocks are counted as "0". The sum total of all stocks trading on an exchange gives the overall market tick.

Briefing.com updates the market tick on our Market Internals page.

The market tick differs from the advance/decline numbers in that only the last trade for each stock is counted. If a stock is up on the day, but trades lower on its last transaction than the previous transaction, that stock is counted as a downtick.

In general, the tick is calculated by each exchange separately.

The last measurement of the market tick is called the closing tick and can be used to judge the sentiment of the day's market.

When the closing tick is very high, for example, more than plus 500 for the NYSE, it is a strong indication of positive market sentiment. It's likely that the day's advance will continue into the next day.

By contrast, a strong "minus tick" is an indicator of negative sentiment and suggests the following day may also be weak.

There are contrarian viewpoints, however, that suggest that strong negative ticks indicate oversold conditions and are therefore positive.

In addition, technical analysts often use running averages of the closing tick to gauge market conditions.

If you know the number of ticks in a particular day, and you know the daily volume, you can calculate the average tick, or the average size of a trade.

For example, if 200,000 shares traded on a particular day, on 100 ticks, the average size trade is 2,000 shares. A small average size trade generally indicates that individual investors are active in the stock. A larger average size trade indicates activity by institutional investors. Whether a "size" is large or small also depends upon the price of the stock.

Our final reflection for you today is on the term "ticker tape parade," which is still used to describe a parade by celebrities or heroes down the avenues of New York. Today it's confetti, purchased for the express purpose of the parade, that is thrown out the window.

The term got its start, however, because people actually threw the accumulated piles of stock ticker paper tape out the window as a parade proceeded past a building. Newsreels from the '20s and '30s show how the ticker tape danced around in a glorious twisting octopus mass of thin strands in the winds of Manhattan. It's one relic from the stock trading past that the Internet has yet to replace.