How to Read the Stock Exchange

Have you ever picked up the Wall Street Journal or looked through the stock market pages in your local newspaper? There seems to be line after line and column after column of letters and numbers, often no more distinguishable than trying to read binary computer code. Although it may be difficult to pick up on right away, reading stocks is a useful tool and does not have to be the headache inducing task it seems to be.

Things You'll Need

• Newspaper

Instructions

1. Pick up your paper and look at the stock quotes. Notice that there are numerous columns, commonly beginning with "52W High" and "52W Low." The "W" stands for weeks, and these columns represent the highest and lowest price per share over the past year--usually not including the previous day.

2. Examine the names and ticker symbols. These are located in the next two columns. The company names may have additional symbols next to them, such as "pf"; if these symbols are not present, the stock is common stock. Symbols can mean different things, normally listed at the end of the quotes. Pf indicates preferred stock. When searching in a stock database or trying to locate your stock on television, you will always use ticker symbols. If you are unaware of a particular company's ticker symbol, you can look it up online or find an old paper with stock quotes and scan through them to find it.

3. Next, rather than looking at the dividend statistics, find the High and Low columns. These represent the high and low share price for that day. These should be analyzed while looking at the Volume column. This column displays the number of shares traded in hundreds. Obviously a large volume indicates an active market, but this does not guarantee it is active because of success.

4. The most important statistic to look at on a daily basis will be the net change. This should only be done in relationship to the business you are looking at, the volume of shares being processed and the activity going on in the company. Without researching the industry and company, net change can be very deceiving. A company undergoing a major philosophy shift may show initial negative change but in the long run could lead to exceptional positive change in stock prices. The net change is listed in terms of monetary change per share at the close of day versus that of the previous day. This information can be used with the closing price, listed in the previous column, to determine the closing price from the previous day.

5. When looking into stock, with the Internet playing such a crucial role, there are a couple of statistics you can look up that will greatly enhance your knowledge of a stock's health. The first is simply the percentage change. You can easily calculate this using the net change and the closing price; this number can tell you just how vulnerable a stock is. A stock dropping major percentage points in 1 day is very susceptible to market changes, whereas those remaining steady or changing gradually are more secure. The final tool to examine on the Internet sites is the chart of change over time. You can normally select between 1 day and 1 year to examine how the stock has fluctuated. This gives you a much better overview of how the stock handles over time. If you plan to make an investment, you need to understand the tendencies of the stock for longer periods, and these charts enable you to do that.

Tips & Warnings

• Learn your company's ticker symbol. Only invest if you are prepared to do so for the long term. Stock quotes only hold value when combined with an understanding of the industry and specific company's situations.

• Investing based on the change you monitor over 1 day or 1 week holds a great deal of risk. If a company cannot sustain growth, your investment will go down as fast as it rises.