Closing price and asking price are two ways you can value a stock trading on a stock exchange. These two prices reflect the value of a stock at certain times, but each has specific advantages and uses. By understanding and interpreting the closing and asking price, you can gauge long-term market trends and monitor intra-day price movements.
Trades occur all day at different prices, but the closing price is the last price the stock trades at on a given day. The New York and Nasdaq stock exchanges are open from 9:30 a.m. to 4:00 p.m. Eastern Time, Monday to Friday. At at 4:00 p.m. the last trade goes through and is registered as the closing price for the stock.
Pros and Cons
As the stock market closes, investors have had the entire trading day to buy or sell and come to an agreement on the value of the stock. The closing price represents the stock value investors decide on. Trends in the stock's price are determined by the closing price. In an uptrend, the closing price is higher than former closing prices on most days. In a downtrend, the closing price is below former closes on most days. During the day, while the market is open, you'll find the current price may be different than the closing price. The closing price only reflects a historic value, not an accurate current value.
While the stock market is open, two prices determine the value of the stock -- the bid and ask price. The ask price is also referred to as the asking or offer price. The bid price is the price buyers are willing to buy at, while the asking price is the price sellers are willing to sell their stock at.
Pros and Cons
As an investor, you can purchase immediately at the asking price, or sell immediately at the bid price, assuming the price doesn't change by the time your order is placed. As a buyer, the asking price gives you the best indication of the current price of the stock. A rising ask price indicates there is buying interest and upward pressure on the stock price. Selling interest and downward price pressure is occurring if the ask price is dropping. The usefulness of the asking price is limited to when the stock market is open. Once the market closes, there are very few traders, and the closing price is a better gauge of a stock's value than the asking price.
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