The prior close is the price of a security before the last market close, used for comparison in day-to-day trading and by financial analysts. It can be manipulated by investors to make a stock appear better. It may not reflect what happens after the closing bell, but is still a useful measure.
In finance, a prior 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 certain stock traded on Monday would be called the previous close until the market reopened on Tuesday morning. Also, the price at which a stock traded on a Friday before the closing bell would be the previous close until the market reopened on Monday morning. An earlier close doesn’t just refer to the stock price. It 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 security from one day to the next. Although a security may trade at various prices throughout the day, the closing price is used for comparison in day-to-day trading. It is the metric used by many financial analysts and financial news programs to discuss the events within the stock market of one day and to prepare, or even forecast, for the next day. Drastic changes in a security’s previous close are often closely monitored and speculated upon, especially if the security is popular with security analysts and investors.
Sometimes investors manipulate the prior close to make the stock appear better on a given day than it actually was. This is done by purchasing a small amount of security at an artificially high price. As such, the previous close will look artificially high and may attract the attention of other investors, called a ‘high close’. To create a high close, the security must be bought at the artificially high price in the last few minutes of trading before the closing bell. Otherwise, another purchase of the security may be made at a more reasonable price, moving the security’s previous close closer to the lower price range that it traded in during the course of the entire day.
Securities are still trading after the closing bell. As such, a previous closing may not reflect what happens after the closing bell. However, it is still used as a useful measure to discuss the events within the market of one day and to prepare for the next day.
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