How To Read A Stock Ticker

You've seen them on financial news networks and online platforms: letters, arrows, and numbers scrolling along the bottom or top of your screen. While many people simply block out the ticker tape, aka the ticker, others use it to stay on top of market sentiment and track the activity of specific stocks. What exactly is that script reeling by? It obviously tells us something about stocks and the stock markets, but how does one read a stock ticker tape and use it to their advantage? Below, we quickly get you up to speed on what you need to know so you can be more fluent in this essential part of financial language.

Brief History

First, a tick is any movement, up or down, however small, in the price of a security. Hence, a ticker tape records each transaction on a securities exchange, including trading volume, onto a narrow strip of paper (tape) or its virtual equivalent on screens.

The first ticker tape machine was developed in 1867, following the advent of (and using the same technology as) the telegraph machine, which allowed for information to be printed in easy-to-read scripts. During the late 19^th century, most brokers who traded at the New York Stock Exchange (NYSE) kept an office near it to ensure they were getting a steady supply of the tape and thus the most recent stock figures—any delay could mean costly missed trades. These latest quotes were delivered by messengers, or "pad shovers," who ran a circuit between the trading floor and brokers' offices. The shorter the distance between the trading floor and the brokerage, the more up-to-date the quotes were.

The ticker-tape machines introduced in 1930 and 1964 were twice as fast as their predecessors, but they still had about a 15-to-20-minute delay between the time of a transaction and the time it was recorded. It wasn't until 1996 that a real-time electronic ticker was launched. These are the up-to-the-minute transaction figures—namely price and volume—that you see today crawling across your screens; while the actual tape has been done away with, the name has stuck.

Due to the nature of the markets, investors from all corners of the globe are trading various stocks in different lots and blocks at any given time. So what you see one minute on a ticker could change the next, particularly for those stocks with a high trading volume, and it could be some time before you see a ticker symbol that interests you appear again with the latest trading activity.

Reading the Ticker Tape

Here's an example of a quote shown on a typical ticker tape:

These quotes will continually scroll across the screen of financial channels or wires throughout the trading day, showing current or slightly delayed data. Often, the ticker will quote only stocks of one exchange, but it is common to see the numbers of two exchanges scrolling across the screen or, indeed, move back and forth among the major exchanges.

You can tell where a stock trades by looking at the number of letters in the ticker symbol. If the symbol has three letters, the stock likely trades on the NYSE. A four-letter symbol indicates the stock likely trades on the Nasdaq. Some Nasdaq stocks have five letters, which usually means the stock is foreign. This is designated by an "F" or "Y" at the end of the stock symbol.

On many tickers, colors are also used to indicate how the stock is trading. Here is the color scheme most platforms use:

Green indicates the stock is trading higher than the previous day's close.
Red indicates the stock is trading lower than the previous day's close.
Blue or white means the stock is unchanged from the previous closing price.

Before 2001, stocks were quoted in fractions, but with the emergence of decimalization, all stocks on the NYSE and Nasdaq use decimals for more precision. The advantage to investors and traders is that decimalization allows investors to enter orders to the penny (as opposed to fractions like 1/16).

Which Quotes Get Priority?

There are literally millions of trades executed on more than thousands of different stocks each trading day. As you can imagine, it's impossible to report every trade on the ticker tape. Quotes are selected according to several factors, including the stocks' volume, magnitude of the price change, how widely they are held, and if there's significant news on the companies.

For example, a stock that trades 10 million shares a day would appear more times on the ticker tape than a stock that trades 50,000 shares a day. Or if a smaller company not usually featured on the ticker has some groundbreaking news, it could be added to the ticker. The only times the quotes are shown in predetermined order are before the trading day starts and after it has finished. At those times, the ticker simply displays the last quote for all stocks in alphabetical order.

How Are Stock Tickers Used?

Stock tickers are used to help investors identify stocks. When placing buy and sell orders, you select the company’s ticker, often an abbreviation of its name rather than its full name.

Tickers serve several purposes. They use fewer characters than the company’s full name, making them ideal for saving space and, more importantly, differentiating similarly named companies or the various shares offered by the same company.

Some companies issue different types of shares, such as preferred stock, common stock, shares with and without voting rights, or shares with more voting rights than others. In these cases, tickers are essential to identify the types of ownership.

For example, Alphabet, the company behind Google, has two tickers. You need to know the difference between GOOGL and GOOG because with the first, you get voting rights, and with the second, you don’t.

Where to Find a Stock Ticker

Company ticker symbols can be found all over the internet. If you search for a company, its ticker or tickers (if it has more than one) should appear. Tickers can also be found on the company's website, searching for the company on the stock exchange platform where it's listed, and on platforms like Investopedia if you don't know the specific exchange.

Some companies have strikingly similar tickers, and some offer more than one type of share. This means you must be very careful to select the correct symbol when trading.

The Bottom Line

Constantly watching a ticker tape is not the best way to stay informed about the markets. Tick indicators are used to quickly identify those stocks whose last trade was either an uptick or a downtick. They are used to indicate prices and determine any trends. Remember that it can be almost impossible to see the exact price and volume at the precise moment of trading. Think of a ticker tape as providing a general picture of a stock's "current" activity.