Basics of Reading Stocks
- Timing is everything, especially in stocks. Start out by finding the high and low prices of a stock over the past year. This will indicate the volatility of that stock and show whether it is trending up or down. Then go to the right side of the chart where you will find the trading range of the stock for that day. It will show its day's high, low and closing prices, as well as the difference in the closing price with the previous day's close.
- In the middle of most stock listings is the heading "Sales," which will tell you the total number of shares
traded that day. This information is useful because you will learn how actively a stock is being traded, thus it will say something about its popularity with investors. In the reverse, it may tell you that a stock is infrequently traded, so it may be subject to greater fluctuations in price.
- Look for the annual dividend paid by that company on its stock. This information is particularly important if you are interested in knowing what income you can expect to receive on your investment. Then move to the heading "PE." It is the "price-to-earnings ratio," which is the relationship between the dividend you will earn and the closing price of the stock. Typically, a high "PE" ratio means that other investors have faith in the company's future, and they are willing to pay a premium for the stock.
- In addition to the daily stock prices you can find in the newspaper, there are several business news programs on television that provide you instant pricing of stocks directly from the exchanges. It may take you some time to understand the value of this, but these listings contain more information that you may find useful.
- Just because you get positive information about a particular stock from the listings in the newspaper, it provides little basis for investing in it. View the information you get from the daily stock listings as the beginning of your analysis of the company. Go to its annual report and consult with various online and printed services that provide the information you need to make an informed decision.