Have you ever wondered what draws people to stocks? There’s this mysterious quality about investing in stocks. You get to literally put your money where your mouth is and invest in something you care about.
Investing in stocks also means that you’re putting money into a company that you appreciate. You get to be a part of the company simply by investing your money. It’s a little bit magical when you think about it.
That pull that draws us into stock quotes doesn’t necessarily mean we understand it. That’s why I’ve put together this newsletter that gives you a guide to understanding stock quotes, what they mean, and how to interpret them.
By the time you’re finished reading this, you’ll be able to calmly assess any stock quote you want to. You’ll have the knowledge to interpret and understand the numbers without emotion.
What Are Stock Quotes?
Let’s start with the basics before we dive into the individual numbers.
Each weekday (markets are closed on the weekend), the multiple exchanges are busy with traders and investors buying and selling shares of different stocks. There are literally millions of orders that go through these different exchanges.
Before the order can go through, the buyer and seller must agree upon a number. Once they’ve found a number that works for them both, the exchange goes through. Essentially, the market is functioning as an auction house.
The key data points that are communicated to the buyer and seller are what make up the stock quote.
The total stock quote can look intimidating, but once you understand the individual numbers, you’ll know exactly how to read it.
Stock Quotes Data #1: Ticker Symbol
The first thing you want to understand is the ticker symbol. This is the abbreviation given to a company trading on the stock market. For example, here are the company names and ticker symbols of a few well-known companies:
- Apple: AAPL
- Home Depot: HD
- Amazon: AMZN
- Tesla: TSLA
- Citigroup: C
- Google: GOOG
- Harley Davidson: HOG
- Franklin Resources: BEN
As you can see, some companies have even found ways to make their ticker symbol a bit funny.
The ticker symbol is how a company is listed and recognized on stock exchanges. You’ve probably seen ticker symbols on ticker tape that moves across the screen on news programs and channels.
Stock Quotes Data #2: Bid Price
The number you see underbid is the highest bid price that has been offered to purchase the stock. This is the highest price that buyers are willing to pay for the stock. This number can help you determine whether or not you’re interested in buying some of that stock.
A high number might be too expensive to purchase. On the other hand, a low number can signal an undesirable stock that you might not want to buy.
Stock Quotes Data #3: Ask Price
In comparison to the bid price is the ask price. This is the lowest price that sellers are willing to sell the stock at. When you look at these two numbers together, you can get a good idea of what you’ll pay for share that you buy.
Stock Quotes Data #4: Number of Available Shares
While the bid and ask price are important for determining whether or not you want to buy some of a stock, you next need to consider how many shares are available. The stock quote might show the number of shares available at both the bid and ask price.
Be aware, stocks fluctuate due to supply and demand which means the stock quote will change over time. With online tools you can see these changes hourly, over a day, and even longer periods of time.
As demand goes down, supply goes up and the price for the stock will change accordingly.
Stock Quotes Data #5: Last Trade
The last trade field on a stock quote represents the price at which the last trade was executed. You can compare this figure to the closing price to glean some more information.
Stock Quotes Data #6: Closing Price
The closing price is the last recorded trade price at the end of the day of trading. If the close price is more than 5% different than the previous day, it’s important to recognize.
Some stock quotes will even bold a close price that’s more than 5% different than the day before. This large of change can be of concern for investors. If you see this, you might want to look for the cause of the change, whether positive or negative.
Stock Quotes Data #7: Opening Price
The opening price is the first recorded price when the trade day opens. On a stock quote, the opening price is an important number to compare with the close price. You might also compare the open price with the current price to gauge the day’s trading momentum and what’s happening with the stock.
Stock Quotes Data #8: Day High/Low Price
The day high and low on the stock quote will give you the maximum and minimum price investors have paid for the stock that day.
Stock Quotes Data #9: 52-Week High/Low Price
One of the more interesting numbers is the 52-week high and low price on a stock quote.
This is the maximum and minimum price that the stock has traded at over the past 52 weeks or one year. This can give you information on the momentum of the stock over a longer period of time.
Stock Quotes Data #10: Dividend Per Share
Dividends are a sum of money that a company pays to shareholders (you, as an investor) on a recurring basis. Dividends are often paid on a quarterly basis.
If this section on a stock quote is left blank, then the company doesn’t currently pay dividends.
The dividend per share is the annual payout to investors per share they own.
If you’re interested to learn more about my recommendations for which stocks you should invest in or receive more tips such as how to read stock quotes, you can sign-up for one of my subscriber only, premium newsletters.