What is the Closing Price?

The Closing Price is referred to the price of a stock at the end of the trading hours. It is generally referred to by traders as a benchmark price to compare the performance with historical prices. It is also used to create graphs and charts for various analyses.

The Closing Price is different from the Last Traded Price which is the price at which the stock was traded before the end of stock market trading hours. The former is calculated as a weighted average price of all the trades in the last 30 minutes of trading hours.

It is important to note that in a few circumstances the Closing Price and Last Traded Price can be the same. If a particular stock is not traded in the last 30 minutes of the trading day, the price at which the stock was last traded becomes the Closing Price. Another interesting fact is to know that even securities that are traded 24 hours have a Closing Price, determined during its regular trading hours.

The Closing Price is not impacted by dividend payouts or stock splits. Such factors are considered in the Adjusted Closing Price.

What are the benefits of Closing Price?

The Closing Price helps the investor understand the market sentiment of the stocks over time. It is the most accurate matrix to determine the valuation of stock until the market resumes trading the next day.

Traders use the Closing Price of the stocks to analyze the market movement at a particular time, which can be monthly, quarterly or even yearly. It helps them understand the stock behaviour in the given period, which helps traders and investors take a well-informed decision.

What are the pitfalls of the Closing Price?

The Closing Price does not reflect a few important points of the market sentiments like stock split, dividend payout or result announcement. Generally, companies announce the results after trading hours to give an investor a buffer time to act upon the result. Apart from that if a company is announcing a split or reverse split, the stock prices will be dramatically halved or doubled, but this effect is not reflected in the Closing Price.

All these effects are reflected in the Adjusted Closing Price based on the trading that takes place after trading hours. These changes may be deceptive to evaluate the stock prices and take an investing decision.

Final words

To sum up, Closing Price is a matrix to determine the changes in stock price over time which is derived by a weighted average price of the last 30 minutes of trading hours. While it is an important metric, it is vital to understand its usage in the market before making trading decisions.