How to Calculate Closing Stock

Study and Understand the Investments In Which You Invest.

There are several meanings of closing stock. One refers to 'closing' a trade begun earlier and another refers to the last trade of a stock on an exchange where it is listed. This article explains the meaning of both terms in the context of daily trading practices.

Instructions

1. Close a trade where you are short a stock by selling it. When you buy a stock you are 'opening' a trade. The terms open and close are necessary for 'pairing' off or matching the buy and sell portions of a trade by the brokerage house clearing operation. Calculate the difference between the buy and sell (the open and close) for net profit or loss. A stock bought at 7 points and sold at 10 gains 3 points.

2. Close a trade where you are short a stock by buying it. In this case the close ends the trade by buying stock to replace the shorted stock. The pairing of the open short and the closed buy is a regular part of trading. Subtract the buy from the sale price (the open minus the close price) for the net profit or loss. A stock shorted at 90 and bought back at 87 shows a profit of 3 points.

3. Use the term 'the close' to refer to the last trade price of the day for a stock. The close is one of the important metrics used in technical analysis along with the open, the high and the low. Every exchange that the stock trades on will have a closing metric on the stock. Stocks like IBM trade on American, Asia, and Europe on major exchanges. Calculate the close by using the last trade on the exchange.

4. Use 'market on close' orders to make certain an investor's trade is sold at the end of the day. Enter the order before the close and it will be aggregated with all the buy and sell 'market on close' orders into a single market clearing price. Day traders regularly use market on close orders to make certain they have no trading position at the end of the day. Calculate 'market on close' orders by using the last trade on the exchange.

5. Understand that closing stock prices are the most important price of the day. It represents the price at which a trader or investor will be willing to take overnight risk into the next day of trading. It is the price investors should use in making a trading decision. This is much different than a day trader who is simply trying to capture highs and lows throughout the day.

Tips & Warnings

• Fibonacci theory, technical analysis and fundamental analysis place primary importance on the close price ahead of any other market consideration.

• Be careful when entering 'market on close' orders. Some brokerage firms require order entry several minutes before the close. The Forex market never closes. It is open for trades at all times.

Resources

• Market Close discussion