Investing

Learning how to read stock tickers can help you better understand the market

Twenty/20

Whether you regularly follow the latest market moves or just catch market highlights sometimes on the local news, learning how to read stock tickers can help boost your overall understanding of how the market works.

Making sense of all the information — from charts to the scrolling ticker tape to a dizzying number of abbreviations — can feel like learning a foreign language. Once you're able to decode what it all means, however, it feels less daunting. 

Here's what you need to know.

What is a stock ticker?

A stock ticker shows the latest price for a particular type of security, like an individual stock or an exchange-traded fund (ETF). This information, which you may have spotted scrolling on the bottom of a financial news program, is continuously updated during the trading day.

Various types of securities are assigned unique ticker symbols to help distinguish them.

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Within the equities market, publicly traded companies get a say in choosing their stock's symbol. Currently, stocks can have symbols ranging from one to four letters, depending on when the company first went public and on which exchange (either the New York Stock Exchange or Nasdaq). ETFs have three- or four-letter symbols, while mutual funds generally have five-letter symbols that always end with an X.

These symbols are key to understanding that stock ticker information you'll find when researching information about the market or watching financial news. 

The tickers you see today came into play decades ago, well before the advent of market-tracking websites or television programs. Thomas Edison, the legendary inventor, improved upon an idea in the 1800s to transmit real-time stock market data from trading floors to various market participants with a machine known as a universal stock ticker. These machines printed up-to-date stock trading data on long strips of paper, called ticker tape, because each change up or down in price is known as a "tick."

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Even though everything is done electronically today, the term "stock ticker" persists. And the long strip of scrolling information remains because people are accustomed to looking at it, explains Phil Mackintosh, chief economist at Nasdaq.

While information for individual stocks is often shown in that scrolling ticker, financial news networks also display data about major indexes like the S&P 500 or Dow Jones Industrial Average, interest rates for Treasury bonds, and commodities prices. 

"Being able to see those big picture data points all the time is actually quite useful," Mackintosh says. "When you're watching television, you've got a feel for all the different things that are going on, but not everything that's happening."

Here are the main elements you'll see:

  • The symbol for the relevant security
  • The latest price
  • An arrow up or down (or a plus or minus sign) indicating whether the security's price is rising or falling, compared with the prior day's close
  • Red or green coloring, often in charts, which shows which whether a security's price is up or down compared with the prior day's close

What the stock ticker information means

Whether you access market data on your phone or computer or by tuning into a financial news network, stock ticker information can be useful as a reference. Professional investors monitor this type of data all day long to make buying or selling decisions.

"What you see when you look at any stock is essentially the Nasdaq's last sale," says Lauren Dillard, executive vice president of global information services at the exchange. "It's almost like you see the receipt between the buyer and the seller and we update that receipt much faster than you can blink your eye."

That said, the information displayed is simply a snapshot of what's happening at any given moment. 

"It's the latest trade that you're seeing on the screen, so you'd have to watch it all day to get a feeling of what's going on before," Mackintosh says. "You've got to take it in a lot of context and online these days, you can see charts over longer periods of time."

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Real-time data and your portfolio

Becoming familiar with how to read and interpret stock tickers can help you to understand broader market trends. That can help demystify investing when you're starting out.

That said, you don't need to worry about watching this information on a daily basis. That's because if you're investing for long-term goals like retirement, what happens in the market on any given day has very little impact on your portfolio down the road. 

And rather than focusing on individual stocks, experts recommend a proven strategy of investing in the market itself. By buying index funds, you can track the performance of a particular market benchmark, like the S&P 500 or the Dow Jones Industrial Average, or assets in other markets, like bonds.

Still, it's important to embrace your role as an investor. Thinking like an investor and learning more about your portfolio will help you to appreciate the market's long-term track record of success. And, in turn, that can help encourage you to continue adding money to your accounts whenever you can.

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All investments involve risk, including loss of principal. The contents presented herein are provided for general investment education and informational purposes only and do not constitute an offer to sell or a solicitation to buy any specific securities or engage in any particular investment strategy. Acorns is not engaged in rendering any tax, legal, or accounting advice. Please consult with a qualified professional for this type of advice.

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