The stock market is one of the most important financial institutions. This is where we trade equities and other financial instruments to invest our money and earn returns.
For this reason, it is very important to understand the stock market and quotes. After all, this is the information on the basis of which we conduct trades.
Why is it important?
When you invest in a stock, you purchase a portion of the company. For this reason, it is imperative that you only invest in a valuable company.
However, merely getting the stock right is not enough. You also need to get the share at the right price. This is because the stock market fluctuates a lot. As demand for a stock increases, its price rises – sometimes more than the stock deserves. In the same way, as demand falls, the stock price of a good company may fall momentarily.
Moreover, the most basic rule of the stock market is to buy at lows and sell at highs to make profits. To do so, one must read the stock quote first.
Elements in stock table:
Quotes are listed in the stock table – a list of stocks along with their information –available in financial papers and online.
Here’s a look at the elements in the stock table:
– Company name and symbol: Because company names are quite big, they are denoted in a different way on the exchange. This is called the ticker name or symbol. It helps identify the company the stock belongs to.
– Stock price: Every share trades at a particular price. This is the value the market has allotted to the company.
– High/low: When the market is open for trading, share prices go up or fall down within the day. The ‘high’ is the highest price the stock has hit in that day. In a steadily gaining market, the ‘high’ would keep climbing. The ‘low’ is the minimum price paid for the stock. Once the market closes, the difference between the highest and the lowest price can give perspective about the volatility in the stock.
– Close:This is the last price at which the stock traded. In a newspaper listing, it shows the price at which the stock closed during the same day. In a listing during market hours, the ‘close’ represents the previous day’s closing price.
– Net change: This is the difference in the price of the stock from the previous closing. It is usually written in both absolute value and percentage format. A positive change indicates the stock price has increased from the previous day.
– 52-week high/low: This shows the highest and lowest stock price in 52-weeks or one year. It gives a broader perspective about the stock’s trading range.
– Volume: On a given day, not all of the stocks floated by a company may be traded. The volume shows how many stocks changed hands. A higher trading volume usually accompanies a significant change in the stock price.
– PE ratio: The stock price is a market-assigned value. To gain perspective about its value in comparison to the company’s financial performance, the PE ratio is used. It is calculated by dividing the stock price by the company’s earnings per share. A low PE ratio means the stock is cheaply available.
– Dividend details: Companies distribute a portion of their profits as dividends to shareholders. Higher dividends mean greater returns for the investor. Many stock quotes also mention the dividend yield. This is the dividend per share divided by the stock price and is calculated in percentage terms. Stocks with continuous high dividend yields are called dog stocks.
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Author- Kotak Securities is one of India’s largest share broking firm offering demat account, online trading, mutual fund and IPO investing service’s along with a research division specializing in Sectoral Research and Company Specific Equity Research. Express your views on their Facebook Page and Twitter Handle (@KotakSecurities) or you can also visit http://www.kotaksecurities.com for more details.