May 28, 2023 By bmapk

In Trading, Why Is It Important to Consider the Last Trade Price?

The closing price of an asset is the last price at which it was traded on a certain day. In many cases, an auction is used to establish this cost.

Some financial assets can only be traded at certain times of the day. For instance, stock and index trading is typically conducted only during hours when the corresponding exchanges are open. This is so until the asset can be exchanged again, at which point its closing price will be indicative of its true worth.

Trading US equities after the market closes is possible with IG and other providers that offer extended hours. When the deal closes, the price will be the same as the closing price.

The adjusted closing price, on the other hand, accounts for any post-market changes in the stock price due to dividends or stock splits. Smaller-volume trading occurs primarily outside of regular business hours for stocks and other financial instruments. Therefore, there is sometimes a discrepancy between the closing price and the after-hours trading price of a share.

The following factors should be taken into account by investors when analyzing closing prices:

Does the closing price depend on the price at which the security was traded on its primary market at the end of the trading day?
Does the closing price correspond to the last trade on the consolidated tape before the market closed at 4:00 p.m.? What’s the local time?
Do after-hours trades have any bearing on the closing price? If so, is there a correlation between the two?
I’m interested in the final agreements.

The final price at which a trade is made in the after-hours market is often reported by financial news outlets and tallied by market data providers as the day’s closing price. Some markets even let you trade after regular business hours. Some investors disregard the closing price and instead trade based on the pricing announced at 4:00 p.m.

The Consolidated Tape Association, the principal distributor of exchange-traded securities transaction prices, has standardized closing prices to reduce the likelihood of confusion. This arrangement fixes the closing price of stocks at 4:00 p.m. during regular trading hours; nevertheless, different media sources and market data providers can continue to publish the closing price of the same stock in different ways. Therefore, it can be puzzling when the media and other parties report various closing prices when a single low-volume after-hours sale occurs at a price significantly different from the 4:00 p.m. closing price. Settlement charges. The closing price of a business on the internet, for instance, would be no match for the price displayed on the consolidated tape that runs across the bottom of a television screen at market close. The next day, the investor may discover that the stock opened “up,” despite being “down” relative to the price at 4:00 p.m. closing the day before.

One Last Thought Closing prices provide useful metrics for comparing performance of stocks over time. Even in the age of 24-hour trading, stocks and other assets all have closing prices, defined as the price at which they last traded on a given day during regular market hours. Until the opening of trading on the following trading day, the closing price of a stock or other investment is regarded as the most accurate value.