What is a Stock Symbol: Overview and History 

A stock symbol, also known as a ticker symbol, is a unique series of letters assigned to a publicly traded company or financial instrument on a stock exchange. These symbols serve as a shorthand identifier for the stock in trading systems and communications. Understanding stock symbols is crucial for investors and traders, as they represent the specific companies or assets they wish to trade. 

Key Points 

• A stock symbol is a unique combination of letters or numbers that identifies a publicly traded company or financial instrument on an exchange. 

• Stock symbols have evolved from simple, single-letter codes to more complex formats as markets and trading technologies have advanced. 

• Stock symbols are used to execute buy and sell orders on the market.  

What is a Stock Symbol 

A stock symbol is typically a combination of letters, numbers, or a mix of both, designed to represent a specific security listed on a stock exchange. For example, Apple Inc. is represented by the stock symbol “AAPL” on the NASDAQ exchange, while Tesla, Inc. uses “TSLA.” Each stock symbol is unique to its respective company, allowing investors and traders to easily identify and trade the stock. 

Stock symbols are not just random combinations of letters; they often carry meaning related to the company name or its business. For instance, the symbol “GOOGL” for Alphabet Inc. hints at its association with Google, the company’s primary subsidiary. 

History of Stock Symbols ^[1] 

In the 1800s, stock trading was done entirely by hand. Brokers had to shout out the names and prices of companies in crowded environments, which quickly became exhausting as more companies started to join the market. To make things easier, they started using shorthand notations, which we now know as stock symbols. 

In 1867, Edward Calahan invented the ticker tape machine, which helped simplify this process even further. The machine used telegraph networks to send signals, turning them into letters or numbers that represented stock symbols and prices. The machine made a ticking sound as it printed, which is how it got the name “ticker.” 

At first, stock symbols were very short, often just one or two letters. But as the number of publicly traded companies grew, these symbols had to become longer and more complex. This change was also driven by the rise of electronic trading and the global expansion of financial markets. 

Different regions use different types of stock symbols. In Europe, most exchanges use three-letter symbols, while in Asia, numbers are often used to avoid issues with different alphabets. For example, on the Hong Kong Stock Exchange, HSBC’s ticker symbol is “0005.HK” 

Companies usually choose their ticker symbols, but the stock exchange can reject them if they’re offensive, too similar to existing symbols, or misleading. Some symbols are straightforward, like Apple’s “AAPL,” while others, like Southwest Airlines’ “LUV,” are more creative. 

Today, stock symbols come in various lengths and formats depending on the exchange, and some even use special characters to indicate things like share classes or market conditions. 

Here are some examples: 

1. Alphabet Inc. (GOOGL and GOOG): 

GOOGL: Represents Class A shares, which have voting rights 

GOOG: Represents Class C shares, which do not have voting rights 

2. Ford Motor Company (F and F-P): 
F: Common stock 

F-P: Preferred stock 

3. Tesla Inc. (TSLA and TSLA-W): 

TSLA: Common stock 

TSLA-W: Warrants 

These special characters help investors quickly identify the type of security they are dealing with but can also be confusing. 

These shares not only have different prices but also come with different voting rights, so mistaking them could lead to significant financial consequences. 

Common Mistakes with Stock Symbols 

Dealing with stock symbols can sometimes lead to costly mistakes for investors and traders. Here are some common mistakes when trading with stock symbols. 

1. Mixing up similar-looking symbols 

As mentioned above, one of the most frequent errors when trading with stock symbols is mixing up similar-looking ones. 

In 2013, the stock of Tweeter Home Entertainment Group, Inc., a long-closed electronics retailer with the symbol “TWTRQ,” suddenly skyrocketed by 1,400% ^[2].  

This huge spike in interest and the incredible return occurred just one day after Twitter Inc., an entirely unrelated company, filed papers for a $1 billion initial public offering (IPO) under its proposed ticker symbol “TWTR.” 

The confusion was likely due to investors mistaking the penny stock of Tweeter for the soon-to-be-public Twitter, leading to a frenzy of buying based on a misunderstanding.  

2. Assuming stock symbols are the same across exchanges 

While a company might trade under one symbol in the US exchange, it could have a different symbol on a foreign exchange. This can be particularly confusing for international investors. 

Let’s use Toyota Motor Corporation as an example.  

In the US, Toyota trades on the New York Stock Exchange (NYSE) under the symbol TM. 

Whereas in Japan, Toyota trades on the Tokyo Stock Exchange (TSE) under the symbol 7203. 

3. Confusing symbols after stock splits  

When a company undergoes a stock split, the number of shares increases, and the price per share decreases proportionally. 

In some cases, the stock symbol might change slightly after a split, or a suffix may be added to the original symbol temporarily.  

In 2011, Citigroup Inc. underwent a reverse stock split. Before the split, the stock traded under the symbol C. After the 10-1 reverse split, the stock was listed as C^1 for a brief period to indicate the split. 

Investors who are unaware of these changes may mistakenly buy or sell the wrong stock. It’s crucial to verify the stock symbol after a split to ensure accuracy in trading. 

Examples of Popular Stock Symbols 

A prime example of popular stock symbols dominating the market are the companies known as the “Magnificent 7.” This group includes seven major tech companies:  

• Apple (AAPL) 

• Microsoft (MSFT) 

• Alphabet (GOOGL) 

• Amazon (AMZN) 

• Meta Platforms (META) 

• Nvidia (NVDA) 

• Tesla (TSLA) 

These stocks have not only become household names but also represent significant portions of major stock indices like the S&P 500. As of mid-2024, their combined weight makes up a total of 35.5% in the index ^[3]. 

Investors closely follow these symbols as they often drive market trends and are pivotal in portfolio performance. The prominence of these companies underscores the importance of understanding and correctly using stock symbols when trading. 

Trading Stocks Using Stock Symbols 

Trading stocks using stock symbols is a straightforward process, but it requires precision. When placing an order to buy or sell a stock, traders must enter the correct stock symbol into their trading platform. This ensures that the transaction is executed for the desired security. 

In addition to basic buy and sell orders, traders must also choose the type of market order they wish to place. 

Common types include: 

• Market orders 

• Limit orders 

• Stop orders 

Read more about the 3 types of stock market orders every investor should know. 

Stock symbols are not just for placing trades; they are also essential when analysing stock charts. These symbols act as the key reference point on charts, displaying a stock’s historical price movement, trading volume, and other relevant data.  

Understanding how to read these charts, with the stock symbol as your guide, is vital for making informed trading decisions.  

By tracking the performance of a stock through its symbol on a chart, traders can identify trends, patterns, and potential entry or exit points – a practice known as technical analysis.  

Accurate chart reading, combined with the correct stock symbol, supports traders in making decisions based on reliable data. 

To learn about stock trading, read our beginner’s guide to stock trading here. 

Conclusion 

Stock symbols are a fundamental aspect of the stock market, serving as the key identifier for publicly traded companies and financial instruments. Whether you’re a seasoned trader or a new investor, understanding stock symbols is essential for successful trading. By familiarising yourself with the history, common mistakes, and examples of popular stock symbols, you’ll be better equipped to navigate the world of stock trading. 

At Vantage, you can trade the Magnificent 7 and other leading US stocks with $0 commission* via Contracts for Differences (CFDs). Sign up for a live account and start trading today!  

*Other fees may be applicable.  

References