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Understanding Stock Quotes

A guide to understanding and correctly reading a stock quote.

Online stock trading begins with getting (and understanding) a stock quote. You can find plenty of resources to get stock quotes online, including those offered by your online broker. Here are a few tips on reading stock quotes like a pro.

How to Parse a Stock Quote

A stock quote actually includes many different numbers to give you a window on the stock's recent activity. Let's start with the stock price information, including the closing price, the last trade price, and the bid and ask.

Consider Google (GOOG) for a minute. Let's imagine it closed its last trading session at 485.02, but in the current session it traded last at 484.95. That gives you a high-level view on the quote for GOOG.

When choosing stocks to invest in, you should examine the bid and ask as well. The bid price is the price at which you can sell stock; the ask price, on the other hand, refers to the price at which you can buy stock. Let's assume Google's bid-ask is 484.81 - 485.10. See that 29-cent difference between the bid (the first number) and the ask (the second number)? That's called the spread and represents the money a market maker or stock exchange makes from each trade.

What about all those other numbers?

If you're just getting to know Google's stock, you should familiarize yourself with a few other numbers displayed with most online stock quotes:

The 52-week high and low put the current price into a yearlong perspective.

Its market capitalization (or market cap for short) refers to the number of Google shares outstanding in the stock market (that's called the float), multiplied by the current stock price.

Volume (or Vol) tells you how many shares are trading hands for a given timeframe. Sometimes there are two volume figures: one for the current trading session, and an average volume for a certain timeframe. Both tell you how actively traded the stock is.

The EPS, or Earnings Per Share, tell you how well your stock's earning results last quarter relative to its current share price.

Similarly, the Price/Earnings Ratio, or P/E, lets you compare the current stock price with the stock's most recent earnings. It's a measure some investors use to assess whether a stock price is overvalued or not.

If you're trading options, you might be interested in the open interest; that's how many options contracts are outstanding for Google right now.

Other fast facts you should review

Many online stock quote services include charts, stock market news headlines, company profiles, analyst reports, and other goodies. Make sure you review this information, too - it'll help give you a clearer picture of the stock, its sector, its competitors, and the industry it represents. Knowing the big picture can really improve yourstock market investment strategy.

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