There is an abundant amount of information on the stock market. Segments of news reports give data on the Dow, Nasdaq and other American and foreign exchanges. If you don't understand what the data means, it's useless to you. Understanding stock market data isn't difficult once you know what the numbers mean and why they're important.
High/Low/The Symbol and Price
Newsprint data normally shows the highest stock price and the lowest for the past 52 weeks. The listing shows the abbreviation for the company name and the ticker symbol for the stock followed by the high and low for the previous year. The second number in all stock market data shows the price of the stock at that moment. The high and low information is relevant if you see the closing price near either one.
The yield is the information involved in any dividend the stock returns. The first display shows the dividend in actual dollars per share. The next number is the percentage of return you make when you receive a dividend on the stock. The number comes from dividing the dividend by the price of the stock. This information is helpful if you want to factor your return on a stock or buy stock for income and need to compare it to fixed investments.
The P/E ratio is the price to earnings ratio. Since stock prices vary, as do the company's profits, it's difficult to compare two different company's profitability unless you have a common factor. That's the P/E ratio. The P/E ratio is most useful comparing two companies in the same industry. To find the ratio, you divide the price per share by the earnings per share. The bigger the number the more overpriced the stock is. Investors use this information in one of two ways. They buy a stock with a high P/E because it implies that people expect the stock price to grow dramatically. Or, they bypass the stock in favor of an undervalued stock with a low P/E, believing that company is stronger and overlooked. Selecting companies with a low P/E is less risky than purchasing those with a higher P/E.
Volume is most important if you trade pink sheet stocks, those not on a regular exchange. The smaller the volume the less chance you have of selling shares to someone. The higher volume stock indicates change might be in the wind for that company. If people are selling, the high volume combined with a price drop indicates the change expected is not good. Average volume tells you if the amount of sales are inordinately high.
Daily Range/Opening and Closing Price
There is a second range on most stock quotes, the daily range. This shows the amount of volatility of the stock through the day. If there's a big difference between the two, look at the opening and closing price of the stock to see if it's good news or bad. It's another indicator of change. Many financial advisers use the daily range and information on historical prices of stocks found on Yahoo Finance.
Do you want to invest in small companies or giants? The market cap section helps you find the size of the stock. It's the market capitalization of the company found by multiplying the price of the share times the number of stocks available. While not always true, historically larger companies tend to be more stable than small or micro-cap companies.
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