A closing price is a market’s final price level before it closes for the day. A market’s closing price is used as the price level shown on a typical line chart.
Closing prices are the benchmark used to measure a market’s daily performance. A market’s price can fluctuate during the day, but a close price is a fixed number that can not only be compared with previous close prices, but also compared with close prices of other markets.
Close prices will very occasionally be adjusted retrospectively after events like stock splits. Stock splits involve the issuing of extra shares and can be a way to make a company’s share price more affordable. For instance, in August 2020 Apple had a four-for-one stock split. Its price fell to a quarter of what it was pre-split, but anyone holding Apple at the time had the number of their shares quadrupled. As a result, the close prices of Apple before the split have been adjusted to now show the relative price to make it easier to compare to its current price.
Why is closing price important?
Closing prices are important as they used as the benchmark to identify price trends and evaluate a market’s performance over a set period.
By taking away the open price from the close price, you can calculate exactly how much a market has risen or fallen in a day. This can be valuable in identifying market sentiment and predicting price trends.
For line charts, the close price is the only information shown – in contrast to candlestick and bar charts that also show open, high and low prices for the day. Therefore, closing prices are the only information used to show trends and highlight whether the market is bearish or bullish.