Stock Trading and Stock Investing

The closing price is more important than the opening price. Knowing this can give you a serious advantage over most other stock traders. You are about to learn how to pull crazy profits out of the stock market from this simple yet profound truth!

Let us just dive right into this.

The final consensus of value in a stock is reflected in its closing price. When people get off work, this is the price they look at: When they print their daily charts after market close, this is the price they see. In the futures market, the closing price is very important because trading accounts are settled based on it.

Professional and institutional traders will trade all during the day. At market open, they take advantage of opening prices by fading gaps, they will buy low openings and sell high openings and then they will unwind those positions as the day progresses. They routinely trade against market extremes and bet on a return to normalcy for any given stock. When a stock hits a new high and then volume drops off, professional traders will sell which pushes the market lower. When a stock price reaches a new low and then sell side volume falls, they buy and push the market up.

The waves of buying and selling by amateurs that hit the market at the opening usually subside as the day goes on. Why? Most amateurs have to go to work and so they trade on the west coast at market open before work. Day traders on the east coast will enter into a position near the opening bell and then go to work and not log in to their trading account again until right before market close. The majority of end of market trading on any given day is made up of professional traders.

If you know this, you have a gigantic advantage! Why? Closing prices reflect the opinions of the professional and institutional traders while opening prices reflect the opinion of amateur traders. Look at almost any stock chart and you will see how often the closing and the opening ticks are at opposite ends of a stock's daily candlestick. This is because amateurs and professionals tend to be on the opposite sides of trades. Trade with the professionals and not against them like most market participants.

Let's say a stock you are long in goes up to its day's high at market open and then drops the rest of the day and finally closes near its day's low: you need to close out of your short term position. What this tells you is that professionals are fading against your position and so you need to get out.

May you make a lot of cash in stock trading after reading this article. For more of Lance Jepsen's free trading tips go to stock market and to learn how to correctly use one of the best money making technical indicators visit stochastic oscillator