How to Understand Terms in the Stock World: 14 Steps (with Pictures)

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How to Understand Terms in the Stock World: 14 Steps (with Pictures)
How to Understand Terms in the Stock World: 14 Steps (with Pictures)

Video: How to Understand Terms in the Stock World: 14 Steps (with Pictures)

Video: How to Understand Terms in the Stock World: 14 Steps (with Pictures)
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If you're starting to have an interest in stock trading, you've probably already decided on a company or two to study. In general, any company whose shares can be traded can be investigated and analyzed in terms of their shares. These terms are a kind of brief description of the shares of these companies, and from this we can determine the performance of these companies on the stock market. Follow this guide to understand stock terms and learn lessons in making investment decisions.

Step

Method 1 of 2: Determining the Stock You Want to Buy

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Step 1. Use a page service

There are many paid and free pages where you can get information on stock terms. Google, MSN, Yahoo!, and others are some examples of other free stock information search services.

The pages sometimes provide more complete information and graphics that are not provided in the newspapers

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Step 2. Look in the paper

To find the stock you're looking for in the paper, you'll need to know the stock code. This code is a combination of letters which stands for the company name. This code may be similar to the company name, but sometimes these two things are not related.

  • Some newspapers sometimes include the full company name with the code.
  • You can find codes for all publicly traded companies by searching for them on various financial services pages.
  • Company pages often write their stock code there.
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Step 3. Watch the text run

Most TV broadcasts and financial channels show stock codes in running text at the bottom of news stories. This provides quick information about stock codes, and usually the information provided is not as complete as newspapers or pages.

Method 2 of 2: Interpreting Stock Terms

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Step 1. Learn all the terms

Most stock listings will provide the same basic information. Stock listings usually provide the following information:

  • Closing Price/Current Price – The share price at the end of the trading day.
  • 52W high/low – This is the range of stock prices from lowest to highest during the previous year.
  • Div – Dividends are paid per share. This section can be empty.
  • % Yield – Percentage of dividends given per share.
  • EPS – Earnings per share.
  • P/E – Price/Revenue Ratio. Comparison of earnings with the price per share.
  • Vol – This is Volume, the number of shares traded on the previous day.
  • High/Low – The highest and lowest prices on the previous trading day.
  • net chg – This is the change in today's price compared to the previous day's closing price.
  • Shares – The number of shares held by investors.
  • Mkt cap – The total value of the company in the market.
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Step 2. Pay attention to the current price

The current price is the price per share at the close of the previous day's trading. This price should only be used as a guide, because it will continue to change, even when the trading day is closed.

Stock prices sometimes do not have information about the currency used

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Step 3. Watch the highs and lows for the previous 52 weeks

This data provides information on the movement of stock prices during the previous year. This information is useful in providing an overview of the stock price movements.

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Step 4. Find information about dividends if available

Some stocks distribute dividends to their investors. Dividends are part of the selling capital of shares which are given directly to investors. Not all stocks pay dividends. If the company does not distribute dividends, this section is left blank or marked with an asterisk.

  • Dividends can be distributed monthly, quarterly, semiannually or annually.
  • In some cases, dividends are reinvested; in a sense, investors receive additional shares instead of money when dividends are distributed.
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Step 5. Calculating Earnings per Share (EPS)

EPS is a calculation of the current share value compared to the company's earnings during the previous financial year. EPS is calculated by dividing net income by the number of shares sold on the stock exchange, except for shares that the company repurchases.

Generally, EPS is considered an important part in determining stock prices

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Step 6. Calculate the price-to-income ratio

This figure is the current share price divided by earnings per share over the previous 12 months (EPS). This ratio is calculated with the aim of showing whether this stock is overvalued or undervalued.

  • A high Price/Earnings ratio means that investors expect higher future earnings, a lower ratio means lower expected earnings.
  • Compare the Price/Revenue Ratio of one company with other companies engaged in the same field as a measure of the company's performance.
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Step 7. Pay attention to the volume of the stock

Share volume is the number of shares traded in the current session (usually in the last session of the day). You can also view the average volume, which is the number of shares traded in a given time period. The timeframe for viewing the average share price may vary depending on the service you use.

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Step 8. Find the lowest and highest price ranges

This figure shows the stock's highest and lowest prices on a given day. This information provides information on how easily the stock price moves up or down.

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Step 9. Look at how the stock performed the day before

The Net Change column provides information on how the current stock price compares to the day before. If a stock is "up", it means that the current price is higher than the price the day before. Some stock information services refer to this figure as the opening price and not the closing price.

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Step 10. Determine the total number of shares

This figure is the total number of shares that have been purchased and can be purchased.

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Step 11. Pay attention to market capitalization

This figure is the total value of a company on the stock exchange. This figure is obtained by multiplying the total number of shares by the current share price.

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