A ticker symbol is a short code used to spot a company that issues stocks or securities. These codes are produced by the exchanges and kept short to help investors and traders easily find them.
Knowing a firm's ticker symbol allows you to access financial and investment data about it quickly.
Definition and Examples of a Stock Ticker
A stock ticker symbol is a short chain of letters that serves as a firm's unique identifier in the trade market. Companies issue stocks or bonds to raise funds, and if their issues trade on stock markets, they need to have a special symbol to be found by people quickly.
In 1867, Edward Calahan invented a device that printed the current prices of stocks. It was later improved by Thomas Edison and became the working model for many broker offices. The device made a ticking sound, so the symbols that represent a firm on an exchange came to be known as its ticker.
Tickers are codes using letters and numbers. There may be up to four letters on the New York Stock Exchange. The Nasdaq uses up to five, but some may use less. The Coca-Cola Company, for instance, uses the ticker symbol, "KO."
Companies can offer more than one type of stock, so there is a need to have more than one ticker. Tickers can add an extra letter or use a period or hyphen within the code to let people know there are different stocks in one company. 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.
How a Ticker Symbol Works
Using a stock ticker is pretty simple. Search on your broker's or exchange's website and access most of the investment data you need.
Most of the time, you'll see the firm's stock chart, dividend and stock split history, and current ask and bid price. Most brokers and exchanges also list daily volume, dividend rate, price-to-earnings ratio, and other relevant trading data.
How Symbols Are Picked
Often, companies can pick their ticker based on if it's already being used on the exchange they list on. If the symbol they want to use is open, they can use that ticker. If not, the exchange will request other ticker symbol options.
A Ticker Symbol Is More Than an Identifier
Market competition in any sector is tight, so tickers can help a firm start or market its brand. Stock tickers that create words that remind people what a company does or its name are highly argued because people may not know which company they represent.
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."
How You Can Use Ticker Symbols
Knowing a firm's ticker symbol is vital 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. This can be a costly mistake.
Tickers allow traders to set up watch lists or use software to keep track of stock prices. This makes finding trades fairly easy since tickers can be grouped in ways that help you to keep your investments straight.
When a ticker symbol has an "E" after its name, that means the company has not met regulatory rules for financial reporting. Once they meet those requirements, the exchanges remove the letters. If they fail to do so, the firm can be delisted and banned from trading until they meet the rules.
Be careful when choosing stocks. Ensure you distinguish between companies who names may sound the same by looking at their tickers and names.
Tickers Can Be Confusing
A small company named Zoom Technologies (ZTNO), confused with Zoom Video Communications (ZM) in 2020, had a sudden spike in trading after people began using the Zoom platform to work remotely during the Covid-19 quarantine.
The SEC stopped trades of the stock for a short time due to concerns over investor confusion. Many people had already given in to herd behavior investing.
- Stock tickers are short symbols made of a few letters that stand for a company, so it can be found in the exchanges.
- Firms can choose stock ticker symbols to reflect their image and to show the difference between types of securities.
- If you want to buy stock, it pays to know a company's stock ticker and to check for accuracy before making trades, since many ticker names are alike.