How Does a Stock Quote Work?

Start with the Ticker Symbol

Learn the stock symbol. Originally, brokers sent stock quotes by telegraph. Because the company names were so long, they developed a short-hand method of denoting specific companies. Standard & Poor's perfected the method and developed the system of stock symbols. The mechanization of machines to carry changes in the price created a tick sound, and the name ticker symbols began. Quotes show the symbol first.

Check the Information

Look for the most pertinent information on your stock quote. The quote gives the last trade cost per share and the amount of change from the previous night's close. If there is a difference in the opening cost and closing cost, it's because of after-hours trading. The stock quote shows the difference between the present price and the closing price of the previous day, and converts that number to a percentage. If the stock is on a negotiated exchange, the quote shows the bid and ask. The bid is what the market maker will pay for the stock, and the ask is what he wants if you buy it.

Look for the Stock Range

Check the stock range for volatility and important information on the high and low. If you're buying a stock and see that the range for the day is 6.00 to 12.00, it shows that the stock is either thinly traded or is extremely volatile. You need to look at the volume of stock traded, keeping in mind the price. If the average amount of trades is normally high, look for a chart that shows the historical highs and lows. It is highly unlikely that a 200 percent swing is normal, and indicates some type of market news, either good or bad. You need to look at the average volume also, particularly on penny stocks. The 52-week range shows the high and low for the stock in a year's time.

Other Stock Information

Use the other bits of information shown on a stock quote. The Market Cap, if shown, means market capitalization, or how big the company is. P/E is the price of the stock divided by the earnings that the company made that year. The bigger the number, the smaller the earnings compared to the price of the stock. This is an indication that the company is changing and incurring costs in the change, invests the money back into growth, or is a great bargain for the money you spend if the P/E ratio is very small.
There also is an EPS number, which means "earnings per share." The higher this number is on dividend yielding companies, the better for you. Finally, in the other information is a dividend and yield box. Some companies don't give a dividend, so it may be empty. If there is one, the first number is the dividend, and the second one is the percentage of return from the dividend.