CandleFocus Glossary Editor
The term “opening price” describes the price of a security or market when it officially opens at the beginning of the trading day. It is important to note that opening prices do not necessarily match the previous day's closing prices. This distinction is important for day traders, who often watch the opening prices of markets and securities as part of their trading strategies.
Generally, the opening price of a security will differ from the previous day's closing price due to change in market sentiment, market volatility, and changes in investors' expectations and views. In order to identify price trend and direction, day traders often look for strong opening prices that are higher than the previous day's closing price. If the opening price of a security is lower than the closing price from the previous day, it may indicate that the downward price trend is expected to continue.
In addition to looking at opening prices as an indicator of future price direction, day traders often use the opening price of a market or security as the basis of their trading strategies. For example, traders that use momentum trading strategies may buy or sell a security shortly after the market or security opens and close their positions shortly after noon or at the end of the day. Day traders that use opening price strategies are looking to benefit from sudden price movements resulting from the opening of the market or security.
Although opening prices are important for day traders, the awareness of opening prices can also be beneficial for long term or swing traders. For example, traders that employ trend-following strategies may look for opening prices of securities and markets that are in strong trends. Identifying these strong trends early on in the day enables traders to adjust their trading strategies accordingly.
Ultimately, the opening price of a security can provide traders with insights into market sentiment, price direction, and trading opportunities. As such, tracking the opening prices of securities can help traders make informed decisions about trading markets or securities.
Generally, the opening price of a security will differ from the previous day's closing price due to change in market sentiment, market volatility, and changes in investors' expectations and views. In order to identify price trend and direction, day traders often look for strong opening prices that are higher than the previous day's closing price. If the opening price of a security is lower than the closing price from the previous day, it may indicate that the downward price trend is expected to continue.
In addition to looking at opening prices as an indicator of future price direction, day traders often use the opening price of a market or security as the basis of their trading strategies. For example, traders that use momentum trading strategies may buy or sell a security shortly after the market or security opens and close their positions shortly after noon or at the end of the day. Day traders that use opening price strategies are looking to benefit from sudden price movements resulting from the opening of the market or security.
Although opening prices are important for day traders, the awareness of opening prices can also be beneficial for long term or swing traders. For example, traders that employ trend-following strategies may look for opening prices of securities and markets that are in strong trends. Identifying these strong trends early on in the day enables traders to adjust their trading strategies accordingly.
Ultimately, the opening price of a security can provide traders with insights into market sentiment, price direction, and trading opportunities. As such, tracking the opening prices of securities can help traders make informed decisions about trading markets or securities.