Learn How to Read Stock Quotes

February 22, 2023 Beginner
New to investing and never ventured past the buy/sell buttons? Start by learning how to read stock quotes and other technical information.

Maybe you're new to the stock market. Or maybe you've been investing for several years but haven't really taken the time to explore the many different metrics designed to help investors understand what's going on with stocks. When you log in to your schwab.com account, you know how to enter buy and sell orders, but maybe you don't quite understand all the seeming minutiae scattered across your screen, such as the historical high, % held by institutions, market cap, ex-dividend date, and so on.

If you find yourself thinking, "Hmm, maybe this is important stuff," you're right. But depending on your objectives and types of stocks you're investing in, some may be more important than others.

All those details are there to help you understand how to read a stock quote from different angles. They help provide a comprehensive view on an asset you may end up buying, selling, or leaving alone. If you're not completely familiar with this information, it's OK; we'll go over each item. The details may seem overwhelming at first, so you might want to take it in small doses. Or bookmark this page as a handy reference guide.

When researching a stock, use the research tools available under the Research Trade tab that can be found under the top-level Research navigation tab to view basic information about a stock, such as the bid/ask price, range, ratings, company profile, and more.

Items you might know

You're likely familiar with these first two terms, unless you've been buying or selling stock exclusively by placing market orders (not always the best way to enter and exit trades, by the way).

Bid: Tells you the highest price at which a buyer is willing to pay to purchase a stock.

Ask: Tells you the lowest price at which a seller is willing to sell their shares.

Beyond this, most information surrounding your trading dashboard may seem self-explanatory. Other terms, however, may be completely unfamiliar. Investors sometimes avoid the unknown if they can still buy and sell shares. There's a lot of critical information there, though, so don't miss out.

Fundamental analysis: Dynamics of stock price movement

Markets (and the stocks within it) are in constant fluctuation—sometimes a lot; sometimes a little. Sometimes, it's pushing new boundaries to the upside or downside, and sometimes, it stays in a tight range. There's an entire philosophy—technical analysis—devoted to studying these movement dynamics. But here's a quick rundown.

Previous close: The price of a stock at the end of the previous trading day.

Today's open: The first price at which a stock traded after current day's opening bell.

Day's range: Tells you how high and low a stock has traded since the current day's market open. It's important to note that this range may expand throughout the day.

Average volume (10-day): Indicates the size of the volume of shares being traded for the individual stock. This is an average of the last 10 trading days, so it measures activity over roughly two weeks.

Last (time) and last (size): Shows the last trade for a stock and how many shares were bought or sold.

52-week range: Indicates the highest and lowest price a stock traded in the last year (52 weeks). One-year highs and lows are typically considered "critical" levels, especially when a stock trades above its one-year high (possibly a bullish signal) or below its one-year low (possibly a bearish signal).

% Below high: Indicates how far a stock's current price stands from its 52-week high. When a stock approaches this level, it can be a bullish signal or a warning that the stock is topping out—either way, brace for potential volatility.

Historical volatility: This figure looks at how a stock's price deviates from its past overall price during certain periods of time. The higher a stock's historical volatility percentage, the greater its volatility risk.

You can't study investing without coming across this warning: "Past performance does not guarantee future results." So, there's no actual predictive power in technical analysis. But considerations like momentum, range, consolidation, breakouts, and more are used by many traders to help inform their decision on direction, magnitude, and timing.

Further fundamental analysis concepts

In contrast to technical analysis, fundamental analysis looks at a company from within—its financial metrics, its business model, its profitability, and so forth. Although entire books, study curricula, and professional certifications are produced on the subject each year, a quick overview can get you started.

Market cap: Tells you the total current dollar value of a company's shares on the open market. A significant change in share value, changes in the number of shares issued, and any exercise warrants on a company's stock can change a company's market cap.

Shares outstanding: Indicates how many shares are currently held by all shareholders, including institutional investors (aka the big players) and even the company's officers and employees.

Earnings per share (EPS): Indicates how a company's net profit is reflected in each share of stock. EPS is derived by dividing a company's net profit by its total outstanding common shares. It's one of two metrics (the other being revenue) that analysts often forecast for the coming earnings quarter.

Price-to-earnings (P/E) ratio: Tells you how much investors are currently paying for a stock above its per-share earnings. This is perhaps the most widely used metric among investors, but it does have quite a few blind spots. You might want to use it in conjunction with other metrics as well.

Annual dividend/yield: Looks at a company's dividend history to indicate how much you might expect to receive in annual dividend payments per share. It's usually indicated in dollar and percentage values. But remember, no dividend is guaranteed. A company can choose to change its dividend offerings, so if you're investing in a stock mainly for its dividends, you might want to keep an eye on these offerings every now and then. The same can be said for the profitability measures above. They can and do change, which is why many investors stay glued to corporate earnings each quarter.

Ex-dividend date: This is the cut-off date for the next round of dividends. If you purchased shares on or after the ex-dividend date, you might have to wait for the next dividend pay period. If you trade options, it's particularly important to know dividend dates and how they can affect options prices and positions.

Beta: Answers the question: How volatile is this stock? Beta is similar to historical volatility as a gauge, but it's more about the company's volatility relative to the broader market. If a stock's beta is one, then it's expected to move roughly with the broader market; if it's greater than one, it might be more volatile than the broader market. By definition, the S&P 500® index (SPX) has a beta of one.

Who's invested?

Some investors like to know who the big players are—those holding the stock as well as those who think it's primed for a pullback.

% Held by institutions: Answers the question: How much of a company's total shares are owned by larger financial institutions, such as investment banks, pension funds, mutual funds, hedge funds, and insurance companies, among others?

Institutional investors are seen as being in it for the long haul. Plus, institutions often have professional money managers who are vetting stocks to include. But other funds—such as index funds—are bound by the criteria set forth in the fund's prospectus. So, it's not a perfect metric.

Short interest (as % of float): Indicates the ratio of shares sold short from the total number of shares available for trading (the float).

There are two ways to look at short interest. First, when the ratio of short interest to float is elevated, above 0.20 (20%), this might suggest that sentiment is bearish. Second, when the ratio is above 0.50 (50%) and the stock quickly rallies, short sellers might have a difficult time buying back shares to cover. This can drive prices up due to a "short squeeze."

The bottom line

These metrics might be a lot to digest all at once but learning how to interpret them is part of becoming a more knowledgeable investor. Once you've gotten the hang of these, you can dive more deeply in to the other tabs in the platform.

But it all starts with understanding the stock quote and other summary info.

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.