DEFINITION of the closing price
The closing price of some assets is the final price at which a security was traded on the specified trading day. In real estate, it is the price at which a piece of property sells.
WHAT IT IS IN ESSENCE
It represents the most up-to-date valuation of security until trading start again on the next trading day. Most financial instruments are traded after hours but with markedly smaller volume and liquidity levels. So the closing price of a security may not match its after-hours price.
Specified financial assets only trade for specified hours each day.
For example, stocks and indices can only be traded while their exchanges are open. Until those assets become tradable again, their closing prices are the most up to date level for the asset. Some providers offer extended hours on many stocks, which enables you to trade when the exchange is closed.
It is still listed as the price when the exchange closes.
Traders can use this information as a signal of a stock’s price when looking at movements over a longer-term. They can be compared to the previous one, or the opening price to measure an asset’s movement over a single day.
The closing price does not necessarily mean the end of all trading on that security for the day. In fact, it simply means the floor of the exchange is closed. After-hours markets remain open, as do other exchanges in other countries and time zones, which provides an opportunity for the price to change.
HOW TO USE
However, the closing price for the same stock may continue to be different by various media and market data vendors. This discrepancy in how the media and others report closing prices can cause confusion. Especially when a single, low-volume after-hours trade occurs at a price that is substantially different from the 4:00 p.m.
For example, the closing price listed on a company’s website could be different from the one shown on the consolidated tape flashing across the bottom of a television screen.
Or, the next day, the investor might hear that the stock opened “up” even though it opened “down” compared with the price at the 4:00 p.m. close.
Investors who check closing prices may want to consider the following:
Is the closing price based on the regular trading session price established on the security’s primary market?
Does the closing price reflect the last trade reported over the consolidated tape as of the close of the regular trading session at 4:00 p.m. Eastern Time?
Does the closing price reflect the last trade reported over the consolidated tape in after-hours trading?