A Lost Art: How to Read the Stock Ticker
Admittedly, reading the stock ticker is somewhat of a lost art in high finance. The original stock ticker was designed for brevity – to save communication costs in the telegraph age. Now, Web 2.0 technologies have made arcane Wall Street hieroglyphics somewhat obsolete. The symbols and quotations might have changed, but the importance of the information will withstand the test of time.
History of the Stock Ticker
The history of the stock ticker shows the symbiotic relationship between high finance and global communications. Here, London and New York City still appear as the ultimate centers of the Universe.
Stock market quotations were firstly translated onto ticker tape through telegraph directly from Wall Street. Clerks at brokerage houses transcribed this information, by hand, throughout the trading session.
With time, the stock ticker has evolved alongside advances in telecommunications infrastructure. Now, data can be transmitted across the entire planet in mere milliseconds, through fiber optics, Trans-Atlantic cable bandwidth, satellite, and even wireless internet.
The dynamic stock ticker moves in real time – tracking shifts in the global economy. Real-time information, of course, is both a Gift and a Curse.
Rapid-fire program trading exacerbates panic and is blamed for Black Monday 1987, when the stock market crashed by 23% in one session. The flash crash is now a regular occurrence and only curtailed by circuit breakers and forced trading halts.
Interpreting Stock Ticker Symbols
Ticker symbols, again, are intended to preserve space on the ticker tape. The ticker symbol is a short-hand identifier for individual securities and leads the information stream for prices and volume.
The ticker symbol itself does provide a modicum of origin information. One and two-letter stock symbols, like V for Visa and KO for Coca-Cola trade on the New York Stock Exchange (NYSE). Two and three-letter stock symbols, like NKE for Nike and XOM for Exxon Mobil trade on either the NYSE or American Stock Exchange (AMEX).
Four-letter ticker symbols such as AAPL and MSFT represent Nasdaq listed corporations Apple and Microsoft. We identify mutual funds with a leading “X,” and stock market benchmarks Dow Jones Industrial Average ($INDU.DJI), Standard and Poor’s 500 ($SPX), and Nasdaq Composite (^IXIC) with a leading dollar or ^ symbol.
Stock ticker symbols parallel historical founding dates for U.S. financial markets. In 1792, the Buttonwood Agreement established what would become the New York Stock Exchange at 68 Wall Street.
In 1971, nearly two centuries after the beginnings of the NYSE, it was the National Association of Securities Dealers / Financial Industry Regulatory Authority (FINRA) that founded Nasdaq as the first electronic stock market in the world.
Last Trade Volume and Share Price
A nominal number immediately follows the ticker symbol on the tape shows volume. Here, on the ticker tape, volume describes the number of shares traded through the last transaction for that stock.
Share price for the latest trade follows the ticker abbreviation, volume, and @ symbol. The quote is closed by a plus or minus symbol, which corresponds to a dollar amount. This information calculates daily performance relative to the close of the prior trading session.
Expect quotes to also list the asking price for stock sales and the bidding price for stock buys. Brokers earn their money from pocketing the Bid / Ask spread. Spreads have narrowed over time, with increased volume and technical capabilities.
Stocks are now quoted in pennies on the dollar. In 2001, The Securities and Exchange Commission (SEC) ordered U.S stock markets to list out prices in decimals, rather than 1/16 fractions. The ongoing collapse of trading commissions towards nil undergirds brokerage industry consolidation.
Stock tickers are for informational purposes only and are of limited relevance for technical analysts. To value a stock, according to fundamentals, you will research corporate assets, liabilities, net income, and cash flow, before making any decision to invest. Corporations disseminate financial reports through investor relations.
Web 2.0 technologies, again, streamline and consolidate the entire stock research and trading process. Now, any amateur may simply enter in a series of stock tickers into his search bar and mobile application – to access a Universe of economic information only made available to white shoe professionals five short years ago.