Ticker&TapeStocks, ETFs and indexes explained
Before you read a single chart, you need to know what you are looking at. Almost everything on Ticker&Tape is one of three things: a stock, an ETF or an index.
What a stock is
A stock (also called a share) is a small piece of ownership in a company. If a company has 100 million shares and you own 100, you own a tiny slice of that business. When the company grows its sales and profits, investors are usually willing to pay more for each share, and the price rises.
Stocks trade on an exchange, where buyers and sellers meet. The price you see is simply the last price at which someone bought and someone sold.
What an ETF is
An ETF (exchange-traded fund) is a basket of many stocks, or other assets, that trades like a single stock. Buy one share of an ETF and you own a small piece of everything inside the basket.
Some ETFs follow the whole market, like SPY (the S&P 500) or QQQ (the Nasdaq-100). Others hold one sector, such as semiconductors or banks, or one theme. You can browse them on the ETFs page.
What an index is
An index is a number that measures a group of stocks. It is a scoreboard, not something you can buy directly. The most watched U.S. indexes are:
- S&P 500: 500 large U.S. companies, the standard benchmark for the market.
- Nasdaq Composite and Nasdaq-100: heavy in technology and growth companies.
- Russell 2000: smaller companies, often tracked through the ETF IWM.
- Dow Jones Industrial Average: 30 large, well-known companies.
Tickers
Every stock and ETF has a ticker, a short code of one to five letters used to look it up. SPY, QQQ and IWM are ETF tickers. On Ticker&Tape you can open any chart by typing the ticker, or by going straight to an address like /chart/SPY/.
A low price does not mean a stock is cheap. A $20 stock is not a better deal than a $400 stock; what matters is how the company is growing and how the price is acting.
Why growth traders trade stocks but watch indexes
The method taught here, popularized by William O'Neil, looks for individual growth stocks: companies with fast-rising earnings whose shares are leading the market. The biggest gains historically came from these leaders, not from the average stock.
But roughly three out of four stocks move in the same direction as the general market. So even if you never buy an index fund, you check the S&P 500 and the Nasdaq every day. If the indexes are falling hard, even great stocks usually fall with them. You will learn how to judge this in market direction.
Common mistakes
- Thinking a low share price means a stock is cheap or has more room to rise.
- Ignoring the indexes and buying stocks while the whole market is in a correction.
- Confusing an index (a measurement) with an ETF (something you can actually buy).
Key points
- A stock is a piece of one company; an ETF is a basket that trades like a stock; an index is a scoreboard.
- Every stock and ETF has a ticker you use to find its chart.
- Growth traders buy individual leaders but check the indexes every day.
Check what you learned
Answer at least 2 of 3 correctly to complete the lesson.
1. Which of these can you NOT buy directly?
An index is a number that measures a group of stocks, a scoreboard. To follow it you buy something that tracks it, such as an ETF.
2. Stock A trades at $20 and stock B at $400. What does that tell you about which is the better deal?
A low share price does not make a stock cheap. Growth and price action matter, not the number on the screen.
3. Why do growth traders check the indexes every day even if they only buy individual stocks?
Most stocks follow the market. If the indexes are falling hard, even great stocks usually fall with them.
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