Why is Closing Price important?

30 janv. 2022

Why do I prefer taking trades at 3:25 p.m.?

Most stock prices rise significantly after 3:25 or fall just before 3:25, forcing us to enter at a lower price. Second, we simply want to be as close to the closing price as possible because many intraday positions are squared off at 3:20 p.m. and the price remains somewhat volatile for the next 5 minutes. In my opinion, the most accurate price is at 3:25 pm, which is reflected in the stocks as well, as most of them close at or near the price at 3:25 pm.

Until trading resumes on the following trading day, the closing price is considered the most accurate valuation of a stock or other security. There is a widely held belief that amateurs always open the market and professionals always close it. Opening prices can be influenced by a variety of factors, including global news, gap ups and downs, economic news, and so on. Furthermore, there is always a larger player than you working in the markets alongside you. By "bigger players," I mean people with a lot of money, also known as institutional investors or "smart money." They trade between 9:15 a.m. and 3:30 p.m., the same time as you. They face the same risk when dealing with billions of shares as you do when dealing with a single share. At night, anything can happen. He is basing his holdings on the day's closing price. As a result, it is the most important price. They are certain that it will not result in a gap the following day.

The primary goal of looking at the closing price is to ignore intraday price movement because it allows us to avoid tracking the market for the entire day, make fewer but higher quality decisions, enforce discipline, and reduce the likelihood of false breakouts. There are numerous examples of the market trading in the positive all day but then dipping into the negative at the end. When such movements occur, it indicates that professional money is at work at the time. In most cases, they are probably better at predicting future events than most people, so they are relying on the closing price of their holdings.

When looking at breakouts, we do not consider it very significant if the stock crosses above a certain level and then returns to the previous level. There are numerous intraday breakouts occurring in the markets, and tracking them is, in my opinion, a futile exercise because it is difficult to predict whether they will hold or not.

As only a few people can spot a breakout in live markets, the closing price is the earliest option to enter a trade. 90% of traders will begin researching the stock after the market closes, putting you ahead of the competition and allowing you to capitalise on gap-up opportunities. It aids in determining whether or not the trend is sustainable.

As a result, as you'll see, most of the charts are plotted solely on the closing price, implying that people's attention is drawn once the price closes above a certain level.