Last Updated on January 23, 2024 by ethinos
There are many facets of the stock market that you may come across each day, but you may have overlooked many of them. One such aspect is the stock symbol or ticker symbol. You may have looked at hundreds or thousands of such symbols over the course of your trading journey. However, do you know their history, why they matter and how they are chosen?
If you’re interested in learning these details, check out this article for all the answers.
Table of Content
What is a Stock Symbol?
A stock symbol is a set of unique alphabets used to represent a stock that is traded publicly on an exchange. You may have seen these symbols while evaluating stocks on the National Stock Exchange (NSE) or the Bombay Stock Exchange (BSE). Different exchanges have different limits on the maximum number of letters that can be used in a stock symbol.
For instance, stocks on the NASDAQ can be represented by up to five letters or characters, while those on the New York Stock Exchange (NYSE) can only use up to four. Meanwhile, closer home, companies listed on the NSE and the BSE can have up to 10 letters in their stock symbols.
Additional Read: What are Authorized Stocks?
Examples of Stock Symbols
To make the meaning of a stock symbol clearer, let’s look at some examples of these alphabetical codes.
| Stock Exchange | Stock Name | Stock Symbol |
| NSE | Indian Railway Finance Corporation Limited | IRFC |
| Steel Authority of India | SAIL | |
| Gujarat Fluorochemical Limited | FLUOROCHEM | |
| BSE | Amara Raja Batteries Limited | AMARAJABAT |
| City Union Bank Limited | CUB | |
| Tata Coffee Limited | TATACOFFEE |
What is a Ticker Symbol?
A ticker symbol is a set of characters used to represent any security traded in the markets, along with various other key details like the number of shares traded, the price and the direction of price change. So, a stock symbol is a part of the ticker symbol. The name is derived from the word ‘tick,’ which means a price change in the context of the financial markets. Ticker symbols help you track price changes at a glance, so you can make quick decisions about entering or exiting a position.
The History of Ticker Symbols
The story of how ticker symbols originated can be traced back to the 1800s. During this period, the New York Stock Stock Exchange (NYSE) emerged as a popular stock exchange with high activity levels. However, unlike electronic trading today, trading back then was mostly conducted in person on the open trading floor. Trades were conducted using the open outcry system for several decades.
To make stock identification easier, Edward Calahan invented the ticker tape machine in the 1860s, and Thomas Edison enhanced it. The machine was used to print the symbol and other details of the stock on ticker tapes. This is another reason why the characters came to be known as ticker symbols.
Eventually, when stock trading transitioned to electronic trades, the symbols were made available online. Today, you can look at stock symbols simply by logging into your mobile trading app.
Additional Read: What is Floating Stock?
How are the Stock Symbols Chosen?
The stock symbols for different stocks are chosen in different ways, depending on the company and its name, product offerings and more. Here’s a closer look at the common ways in which stock or ticker symbols are generally created.
| Method of Creating the Stock Symbol | Example of Companies | Stock Symbol of the Company |
| The first letter of each word in the company’s name | Indian Railway Finance Corporation Limited | IRFC |
| The company’s entire name | Zomato Limited | ZOMATO |
| The first word of the company’s name | Persistent Systems Limited | PERSISTENT |
| A key word from the company’s name | Gujarat Fluorochemical Limited | FLUOROCHEM |
| A combination of parts of words from the company’s name | Colgate Palmolive (India) Limited | COLPAL |
| The flagship brand of the company (which may be more popular than the company’s incorporated name) | FSN E-Commerce Ventures Limited | NYKAA |
The table above shows you that there are different ways in which the stock symbol or the ticker symbol can be created. As long as the symbols adhere to the rules of the stock exchange on which the company is listed, there’s no issue.
The rules for creating ticker symbols vary from one country and one exchange to another. In Japan, for instance, stock symbols do not include alphabets. Instead, they are represented using four-digit numerical codes. This may change in the future since the number of four-digit codes are limited. Similarly, there will also be restrictions on the maximum number of characters.
Reading a Ticker or Stock Symbol
It’s essential to learn how to read ticker symbols because you can get a clear overview of the stock. The following tips can make it easy to read ticker or stock symbols.
- Look at the stock symbol to identify the company it pertains to.
- Check the number of shares traded, which typically appears next to the stock symbol.
- Beside this, you’ll find the current market price of the stock.
- This is usually followed by a tiny red/green downward/upward arrow to indicate the direction of price change.
- Beside the arrow, you’ll find the amount of price change.
The Importance of Stock Symbols and Ticker Symbols
Stock symbols by themselves may only give you one crucial bit of information — the name of the company. But when combined with the other elements in the ticker, you can gather various insights about any stock or security you are interested in at just a glance. This is extremely useful for active traders because there are thousands of stocks listed on the NSE and the BSE.
Having to manually check and calculate which stocks are up or down can be tedious, time-consuming and extremely inefficient. Instead, traders only need to look at a ticker symbol to gather key information about the liquidity, price and price changes within a matter of seconds.
Additional Read: What is Multibagger Stocks?
Conclusion
Learning to read stock symbols and ticker symbols is a small step that can give you big rewards over time. It can help you plan your entry into and exit from the markets on the go, and make it easier for you to monitor the stocks you are interested in.
