If You Can’t Read One of THESE You Have a Problem…
I’ll cut right to the chase here …
When you have access to real-time stock quotes, you can potentially improve your chances of profitability. And not knowing how to read stock quotes is a huge blind spot that can potentially stunt your growth as a trader.
Any questions? Good. Let’s move on …
From pre-market trading quotes to adding stocks to your watchlist, I’ll walk you through this topic and help you better understand how it figures into your trading strategy.
I’ve been reading stock quotes for decades now, but I still get surprised when a company’s stock moves differently from what the stock quote leads me to predict. That instability makes trading more fun.
If you don’t know how to read a stock quote, this primer will help prepare you. I’ll explain how to read a stock quote and how to incorporate quotes into your trading strategy.
What are Stock Quotes?
A stock quote is a group of information about a specific stock’s current activity. It tells you the bid and ask prices as well as the trading volume.
Let’s break that down for a sec.
The bid price is the amount of money someone on a stock exchange is willing to pay per share of a given stock. Ask price refers to what a shareholder is willing to sell for, and the trading volume tells you how many shares are in play during market hours.
Stock quotes also usually tell you how much someone paid the last time shares of the stock changed hands. That’s useful information when you’re not sure about the spread, which is the difference between the bid and ask prices.
To make things even more interesting, there are different types of stock quotes.
Types of Stock Quotes
There are different types of stock quotes because there are different types of traders.
If you’re reading this, you’re likely a retail trader. You have an investment account through an online brokerage firm, and you execute trades through it. When you’re a beginner, you likely concentrate on the most basic information.
As you get more experienced, you might decide that you’re a day trader, swing trader, or long-term investor. You need access to more information so you can profit more handsomely from every order.
Then you have the market makers. These are major financial firms that essentially fund the stock market. They’re responsible for the stock market’s liquidity.
Each of these three types of traders and investors uses different types of stock quotes. There are three levels, but I’m only going to focus on the first two today. Level III stock quotes are only available to market makers.
Level 1 Stock Quotes
Level 1 stock quotes give you the most basic information. Amateur and newbie investors often start with these.
You get the bid/ask prices in real time as well as the last-traded price. You don’t get to see what the market makers are doing or execute orders. Active traders need more than this, which is why Level 2 quotes exist.
Level 2 Stock Quotes
Access to Level 2 stock quotes is what you need if you want to be an active trader.
In addition to the information provided at Level 1, you also get to see market makers’ order sizes, limit orders, stocks that have been shorted and in what quantity, and more. It’s the trader’s playbook.
How To Read a Stock Quote
Stock quotes might look different depending on what electronic trading platform you’re using, but if you’re getting Level 2 quotes, you’ll see the same information. Don’t worry about the order or format in which it’s presented.
Learning how to read a stock quote is easy, but understanding how to interpret each variable takes practice. If you’re curious about the process I use to find great penny stocks to trade, check out this video I made a few months ago. It’s full of actionable information.
Let’s check out the different parts of a stock quote so you can get the hang of reading them correctly.
52-week High and Low
One of the first pieces of information you’ll get with market quotes is the 52-week high and 52-week low. Just like it sounds, this information tells you the lowest and highest price per share of a given stock over the previous year.
The data used for this information usually includes stock prices two days previously and for the 52 weeks before it. You’ll get a broad understanding of how the stock performs, its volatility, and it’s average price.
Company Name & Type of Stock
This can get a little confusing, but you really only need to pay attention to the company name. In fact, you don’t even need that if you have the ticker symbol and know what it means, which I’ll get into below.
What does the company name have to do with reading stock quotes? It allows you to research that company and learn about any news that has surfaced recently. News catalysts can cause massive shifts in price movement.
You’ve likely heard the term “ticker symbol.” It’s the way in which the stock market tracks specific shares of a company’s stock. In many cases, it’s a shortened form of the company name.
For instance, Costco is COST, Walmart is WMT, and Cinemark is CMK. Ticker symbols are sometimes referred to as stock symbols, but that term is less common.
If you’re trading major companies, for instance, you might buy 100 shares of AAPL. That means you’ve bought 100 shares of stock in Apple.
Dividend Per Share
Some companies pay dividends to shareholders every quarter. These payments are used to help prevent stock market fraud and to reward shareholders for their continued investments. You’ll see the dividend per share if the company pays dividends.
When you see the term “yield” in finance, the source is typically talking about the amount of money or other assets you collect over a given time period. Dividend yield represents your annual yield per share from a given stock
And that’s just the tip of the iceberg… there are more components I want to go over with you tomorrow. I’ll also go over how to use stock quotes as part of your investment strategy.
Because, let’s be real, what good is all of this to you if you can’t actually put it into practice?
— Tim Sykes
Editor, Penny Stock Millionaires