The previous close refers to the price of a security before the last market close and is used to compare prices from one day to the next. It can be manipulated by investors to appear higher. It is a useful metric for discussing events within one day’s market and preparing for the next day.
In finance, a previous close is a term used to refer to the price of a security before the last market close. For example, the last price at which a particular security traded on Monday would be reported as the previous close until the market reopened on Tuesday morning. Also, the price at which a stock traded on the Friday before the closing bell would be the previous close until the market reopened on Monday morning. A previous close does not only refer to the share price. It also applies to other types of securities, including futures, commodities and bonds.
The previous close is often used as a way to compare the price of a stock from one day to the next. While a stock may trade at a number of prices throughout the day, the closing price is used to make comparisons about a day-to-day activity. It is the metric used by many financial analysts and financial news programs to discuss events within one day’s stock market and to make preparations or even predictions for the next day. Dramatic changes in a stock’s previous close are often closely monitored and assumed, especially if the stock is popular with stock analysts and investors.
Sometimes the previous close is manipulated by investors to make it appear that the stock did better during a given day than it really is. This is done by buying a small amount of the stock at an artificially high price. Therefore, the previous close will look artificially high and may attract the attention of other investors, which is called a “high close”. To create a high close, the stock must be bought at the artificially high price in the last few minutes of trading before the closing bell. If not, another purchase of the stock can be made at a more reasonable price, bringing the stock’s previous close closer to the lower price range at which it traded throughout the day.
The shares are still trading after the closing bell. Therefore, an earlier close may not reflect what happens after the close bell. However, it is still used as a useful metric for discussing events within one day’s market and preparing for the next day.
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