Theclosing priceis the final valuation of a security during regular trading hours, while the last traded price (LTP) is taken from the last transaction involving a particular security. One would think they should be the same if you're looking up the price of a stock after hours, but that's not always the case. The closing price of a security can vary from the LTP at the end of the day for several reasons: inconsistent reporting standards among traders and exchanges, the flurry of activity in the final half-hour before the market closes, and trading continuing after the stock exchange has closed for the day.
Key Takeaways
- The closing price is the final one at which a security is traded during regular market hours on a given trading day. This price is used as a benchmark by investors to compare a security's performance over time.
- The last traded price (LTP) comes from the most recent trade of a particular security. The LTP could be from any time during trading hours, not necessarily at the market close.
- After-market trading can change the LTP even after the official closing time.
- The closing price of a security can also differ slightly from the LTP for the day because of conflicting reporting standards.
- The last 30 minutes of trading before the market closes can be quite chaotic, and the last trade can be a challenge to identify.
The Closing Price and Last Traded Price (LTP)
The closing price is the last transacted price in a security before the market officiallyclosesfor regular trading. Investors often use this price as a reference point for technical analysis and charting the changes in a stock’s value over time.
The LTP, meanwhile, is the value at which the last transaction occurred for a particular security. Unlike the closing price, which is calculated once a day, the LTP changes regularly throughout the trading session.
You’d assume that the closing price and LTP would be the same once markets close for the day. In reality, it’s a little more complicated. The last trade you see at the close may not be the last.
The Final Half-Hour
The final 30 minutes before the bell rings and the market closes are usually the most hectic. The large volume of trades within this short time frame makes it challenging to determine the exact final trade of the day. Many stocks trade heavily this time, and a few minutes are required to process the orders and determine which among them counts as the last trade.
Depending on the exchange or the stock quote service you're using, the genuine last trade may be posted anywhere from 30 seconds to 30 minutes after the closing bell rings.
A late-afternoon online search for the closing price or last quote on any stock might reveal conflicting results from different sources.
Consolidated Quotes and Exchange Quotes
The closing price you see when you search online is often aconsolidated quote. According to Nasdaq, this closing price is not to be confused with "the final last sale eligible trade report submitted...during the regular trading session by any market center." The quotes you see online come from a system that pulls data from all the stock exchanges and puts them into one data stream.
In addition to a consolidated closing quote, many exchanges, including the New York Stock Exchange (NYSE) and the Nasdaq, offer a different official last trade or closing price for trades on their exchanges. The "closing cross" determines the Nasdaq official closing price (NOCP). Meanwhile, the NYSE determines closing prices by focusing onmarket-on-close (MOC) andlimit-on-close (LOC). Let's differentiate these to allay some confusion:
- NOCP: This price is determined by the Nasdaq at the end of each trading day. It's calculated through the "closing cross," where buy and sell orders are matched at the market's close to determine the day's final price for each security.
- MOC orders: Orders to buy or sell a security at the end of the trading day at a price equal to its closing price. The NYSE uses these orders to help determine the closing price of a security.
- LOC orders: Like MOC orders, they allow investors to specify the highest or lowest prices they are willing to buy or sell a security at the end of the trading day. Like MOC orders, LOC orders contribute to determining a security's closing price on the NYSE.
The Effect of After-Hours Trading
The regular trading session for U.S. stocks starts at 9:30 a.m. and ends at 4:00 p.m. ET on weekdays, holidays excluded.
However, some exchanges also havepremarketorafter-hourstrading sessions. In the U.S., this would be between 4:00 a.m. and 9:30 a.m. ET and 4:00 p.m. to 8:00 p.m. ET on weekdays.
After-hours trading allows investors to buy and sell securities outside regular trading hours to respond to news or data releases after the close. While there are fewer stocks traded at this time, these trades still affect share prices. This means the opening price for a stock on the following day may differ from the price at which it closed the previous day.
Since the beginning of after-hours trading in 1991, it has been normal for the LTP to differ from the closing price of the same stock. This is because the last price, in this instance, is from the last transaction in after-hours trading.
Is the Closing Price the Price of the Stock?
Share prices move throughout trading hours as investors buy and sell company stock. The closing price is the registered price at the end of the regular trading session when the stock exchanges close. It is followed closely and used to illustrate longer-term price movements but is seldom the same price an investor would buy or sell at.
Do Stocks Open at the Price They Closed the Day Before?
Not necessarily. When news emerges outside trading hours, it can lead to a large volume of trading in after-hours trading, pushing the price higher or lower than the previous day's close.
Why Is the Closing Price Preferred in Technical Analysis Over Other Prices?
The preference is rooted in the idea that the closing price represents the final consensus of value for the day, the culmination of an entire day's worth of trading, incorporating all that day's information, news, and investor behavior. Technical analysts often view it as the most reliable indicator of a stock's future trajectory. By contrast, other prices, like the opening price, may be more influenced by overnight news or premarket activity, which might not reflect broader market sentiment.
The Bottom Line
The closing price is the price at which a security ended the trading session. However, that doesn’t mean it's the last price traded for the day. The closing price for the same security may be reported differently by various outlets, data vendors, and brokers. It can take a while to identify the actual last trade in a busy closing session, and investors can trade after the market closes, shifting the stock price.
