Day Trading Formulas Opening Price
When it comes to opening price for day trading, it is affected by the previous day's closing price. In addition, even the trading that occurs after hours affects the opening price the following day. Here is a how opening price is determined. |
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One thing that newbie day traders should understand that the closing price from the previous day is not taken as an indicator to judge a stock's value. Many things would have changed since close of trading the previous day. For instance, the news about a company's stock may have broken after close of trading day, trading in foreign exchanges that open long before the stock exchanges in the US and the change in orders for a stock can affect the opening price for a stock.
Usually a specialist in the NYSE or ASE is responsible for deciding the opening price in these stock exchanges. The specialist will end up choosing a price that will help to execute the maximum number of shares. This is done by closely looking at the buy and sell offers. If there are no orders for that particular day, then the specialist will make an educated guess to determine the opening price.
The opening price is a fair indicator of a stock's value. Through this price you can figure out whether a stock is going to go up or down.
Day traders should look for the opening price signal to see which stocks are more profitable than others. Opening price signal can be determined by taking the last price at closing time and then subtracting the opening price from it. If the opening price signal comes out positive, then that particular stock in on an upward trend.
Experts advise day traders to work only with opening price signal and work with only positive ones. The opening price signal will give you an indication of the market sentiment for that particular stock.
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