For the uninitiated understanding a stock chart may seem like an exercise in dark magic, but successfully trading stocks starts with learning how to read a stock quote and comprehend the lingo. A typical stock quote includes several numbers that provide a look into a stock’s recent activity, and once you understand the numbers you have a better chance of figuring out if the security is a good investment.
When reading a stock quote the first things to look for are the “bid” and “ask” prices. The bid price is the amount you can sell the stock for and the ask price denotes to the price you can buy stock for. For example, assume Acme stock has a bid price of $95.85 and an ask price of $96.10, a 25-cent difference between the bid and the ask. This is the “spread” and signifies the money the stock exchange makes from a trade.
The “52-week high” and “52-week low” help investors put the stock’s current price into perspective against it performance over the past year, as these number reflect the prices of the stock for the last 12 months.
The stock’s “market capitalization,” often referred to as market “cap” for short, refers to the number of shares of stock the company has in the market that are available to be bought and sold, multiplied by the stock’s current price.
“Vol” on a stock quote stands for volume which indicates you how many shares of stock traded hands for any given timeframe. Sometimes a stock quote will display a volume figure for the current trading day, called a “session,” and a second number which is the average volume over a specific timeframe, such as 30 days.
“EPS” stands for Earnings per Share and signifies how much a stock earned per share during the last three months of trading.
Similar to the EPS, the PE Ratio is the Price-to-Earnings Ratio and compares the stock’s current price to the stock’s recent earnings. The PE Ratio is a metric investors typically use to measure whether or not a stock’s price is overestimated.
The “sector” denotes which industry, such as health care or public utilities, a stock is in and helps to understand what other companies a stock is in direct competition with.
Most online stock services include charts, stock-market news, analyst reports and company profiles, and this information will help give you get a much clearer picture of the company and its stock, the stock’s sector and the industry the sector represents.