Share features explained

A shares has several features that you should familarise yourself with. The share features are listed and explained below.

Last Price

The last price the share was traded at.

Bid Price

The price at which you can sell your stock.

Ask Price

The price at which you can buy your stock.

Note: There is always a small difference between the bid and the ask price, this is where the market makers make their money.

52 week high

The highest price the share reached over the last 52 weeks.

52 week low

The lowest price the share reached over the last 52 weeks.

Stock ticker symbol

The ticker symbol is the shortened name for a company. It is the 1-4 letter symbol next to the name of the share.

Example

MSFT = Microsoft
VOD = Vodafone

The ticker symbol is often required when searching for a share. Ticker symbols are especially useful online when entering shares quickly into a watchlist or portfolio.

Volume

The volume of a share refers to how many times the share has been traded in the day.

Average Daily Volume

Average daily volume is normally calculated over a 90 day period.

If a stock has an average volume of 5 million it means, on average, 5 million shares are traded each day.

The higher the average daily volume the more liquid the stock is. This means the share is more stable as more people are willing to buy or sell the share when you need to get rid of it.

Note: Low volume should be avoided when acquiring a share as it can result in liquidity problems. This is because when you come to get rid of the share and no one on the other end wants to acquire it then the price can easily drop 0.5-2%, if not more, before you can get rid of it.

Market capitalisation

The market capitalisation refers to the value of the company in terms of issued share capital. The formula for working out market capitalisation is (share price x no of shares in issue).

Companies with huge market capitalisation can directly influence the direction of the stock market, especially in the UK where there are less companies and where the bigger companies take up a large % of of the overall market capitalisation.

The market capitalisation of a company determines whether they make it into certain indices i.e. FTSE 100.

Generally speaking, the smaller the market capitalisation of a share, the less liquid the share is.

Note: To get the hang of the concept of shares I recommend opening up a free practice account, you can trade shares with ‘virtual’ money which means you don’t lose a penny and by practice trading you learn how much money you can make and lose pretty quickly (plus its great fun buying and selling shares for the first time!!).