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What is Stock Price

When you make a trade, you are betting on a price change. You can make money by buying low and selling high or shorting high and covering low. Price is a consensus of value between all the market participants at the time of the trade. In addition, each trade reflects the emotions of the market crowd at that particular moment. This means that high and lows, opening and closing prices, and intraday swings all represent crowd behavior.

Bar charts are often used for tracking prices, and therefore for this entry, I will be referring to bar charts.

 

Opening Price

The opening price is the first price of the day, when the market opens, and it is marked on a bar chart by a tick pointing to the left. The opening price also reflects any overnight orders when the market was closed.

Opening prices often reflect opinions of amateurs. Meanwhile, professional traders take advantage of opening prices, buying low openings and selling high openings. Their normal technique is to trade against market extremes until it returns to normalcy.

 

The High

Prices go up because buyers do not mind paying more money. Eventually, prices rise to a level where bulls see the market as overpriced, sell, and take profits. Then, the market turns and begins to fall, leaving behind the high point of the day. The high point marks the greatest power of bulls for that day, which is marked by the high of every bar on a bar chart.

 

The Low

Prices fall because buyers have cut back on their buying, making it easier for bears to push prices lower. Eventually, prices decline to a level where bears start running low on money. Traders start going long and prices rally, leaving behind the low point of the day. The low point marks the greatest power of bears for that day, which is marked by the low of every bar on a bar chart.

 

Closing Price

The closing price is the last price of the day, when the market closes, and it is marked on a bar chart by a tick pointing to the right. It marks the final consensus of value for the day. Near the closing time, professional traders are dominating the market, and therefore, closing prices often reflect opinions of professionals.

If you look at any chart, you can see how often the opening and closing ticks are at the opposite ends of a price bar. This reflects the expression, Amateurs open the market, professionals close it? because amateurs and professionals often trade on opposite ends.