Real time stock quotes are live prices that reflect trades taking place in the stock market. A stock price includes a monetary value coupled with a directional change, either upward or downward, that represents where a stock stands compared with the last trade. If a stock is trading higher, there is buying activity occurring in that security, while a downward move represents selling action. At the end of a trading session, there is a closing stock price that determines where the security will begin trading on the following day.
An alternative to real time stock quotes are delayed prices with as much as a 15-minute lag. A ticker tape that runs along the bottom of a television screen on a business network might include delayed prices, although users can obtain real time data on the Internet by subscribing to certain services. Trading in real time is especially important for traders on a stock exchange whose livelihood revolves around placing bets surrounding speedy and incremental changes in a stock's price.
Investors, of course, are trying to enter a stock position at the lowest possible price and sell a security at the highest value for a profit. Real time stock quotes can be the difference between profits and losses. If an investor is about to enter a trading position, for instance, but notices from real time stock quotes that the investment is declining precipitously in value, he may decide to reconsider his purchase.
There are components that determine the value of real time stock quotes. The bid and the ask price represent supply and demand in a stock. A bid price reflects the most recent price where investors were willing to purchase the stock, while the ask price reflects the amount where investors were most recently willing to sell the stock. A spread is the difference between the buy and the ask price, and it represents fees paid to a trader or market maker who facilitates buy and sell orders.
The importance of real time stock quotes in the financial markets surrounds timing. Traders are better able to execute profitable trades with the most up-to-the-moment information. The stock exchange where the trades are being made plays into timing, as well.
In the US, the Nasdaq exchange is an all-electronic stock exchange where computers are responsible for executing buy and sell orders. The alternative to an electronic exchange is an open-outcry system, where human trading specialists manually match up buyers and sellers in a stock. High-speed electronic models at stock exchanges are credited with executing the fastest of trades and ultimately obtaining the best possible price for investors. Some exchanges, such as the New York Stock Exchange Euronext, which is a combination of two of the largest exchanges in the US and Europe, adhere to a hybrid model where there is both electronic trading and an open-outcry system.