How a Ticker Symbol Is Used to Identify Stocks

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A ticker symbol is a short code used to identify a company that issues stocks or securities. These identification codes were designed by the exchanges and kept short to help investors and traders easily identify them.

Knowing an institution's ticker symbol allows you to access financial and investment-related information about the company quickly.

What Is a Ticker Symbol?

Companies issue stocks or bonds to raise capital. If their issues trade on public exchanges, they need to be uniquely identified to be recognized by investors or traders quickly.

Edward Calahan invented the first stock ticker in 1867, a device that printed the current prices of stocks. Thomas Edison later improved the device, which became the working model for many broker offices.

The device made a ticking sound as it printed out the symbols and prices, so the symbols representing a company on the exchanges came to be known as its ticker.

Tickers are alphanumeric codes with up to four letters on the New York Stock Exchange or five letters on the Nasdaq. Companies can offer more than one type of stock, so there is a need to distinguish between them. Tickers can add an extra letter or use a period or hyphen within the code to symbolize their different stocks.

How a Ticker Symbol Works

Using a stock ticker is relatively straightforward. The Coca-Cola Company, for instance, uses the ticker symbol, "KO." You search on your broker's or exchange's website and access most of the investment-related information you need.

In general, you'll see the company's dividend history, stock chart, stock split history or current ask and bid price. Most brokers and exchanges also list daily volume, dividend rate, price-to-earnings ratio and other relevant trading information.

How Symbols Are Picked

Google (Alphabet Inc.) uses two tickers—GOOG and GOOGL to designate common and preferred shares. Berkshire Hathaway has two classes of shares on the market, BRK.B and BRK.A, differentiating shareholder voting rights.

In general, companies pick their ticker based on availability of the exchange they list on. If their preference is open, they get their choice. If not, the exchange asks for other ticker symbol options.

Ticker Symbols Are More Than an Identifier

Market competition in any industry is tight, so tickers can help a company establish or market its brand. Stock tickers that create words that are similar to what a company does or the company name are highly contested—often investors become confused by similarities.

The ticker 'COIN' belongs to Nasdaq-listed cryptocurrency exchange Coinbase, while 'WORK' is the ticker for workplace messaging platform Slack Technologies. Dynamic Materials Corporation, which is a metalworking company, uses the ticker symbol "BOOM."

Certain exchange-traded funds also have creative ticker symbols. For example, Procure Space ETF trades with the ticker 'UFO', while First Trust Global Wind Energy ETF has the ticker 'FAN.'

Exercise caution when choosing stocks. Ensure you distinguish between similarly named companies by looking at their tickers and names.

Tickers Can Be Confusing

A small company named Zoom Technologies (ZOOM), confused by investors for Zoom Video Communications (ZM) in 2020, experienced a sudden spike in trading after companies began using the Zoom communications platform to work remotely during quarantine.

The Securities and Exchange Commission temporarily suspended trades of the stock due to concerns over investor confusion, but many investors had already succumbed to herd behavior investing.

What It Means for Individual Investors

Knowing an institution's ticker symbol is essential when it comes to buying or selling shares. If a trading friend talks about a trending stock and another trader enters the wrong ticker symbol while making a trade, that trader ends up with the wrong asset—which can be costly.

Tickers allow traders to set up watch lists or use software to monitor their investment's price. This makes identifying trades much easier since tickers can be categorized in different ways to facilitate the investor.

When a ticker symbol has an "E" or "LF" after its name, that means the company has not met regulatory requirements for financial reporting. Once they meet those requirements, the exchanges remove the letters; if they fail to do so, the company can be delisted and banned from trading until they meet the conditions.