Closing prices are associated with the end of a trading session, such as at the end of the trading day or week. Sometimes referred to as a close, the closing price will be the final price of the last transaction executed by an investor on a given security at the end of the trading day. The object of the investor is to employ various strategies in order to position the order in such a way that the best possible price is achieved.
There are different schools of thought on what constitutes a good closing price. For some investors, the key to buying at just the right time involves properly predicting the point at which the stock will be at the lowest unit price, but will shortly begin to increase in value. Following this approach, the investor will attempt to purchase a number of shares during the trading session that takes place just before the anticipated rise in value. In theory, this will help to maximize the total return that the investor realizes from the transaction, assuming that the stock is also sold just as it peaks.
A slightly different approach involves acquiring stocks at a good closing price, even if they are not anticipated to begin appreciating in value in the short term. The expectation is that the stock will reach a bottom price and remain there for a given amount of time. In this scenario, the strategy is to acquire the stock when the value is at the lowest point and hold on to the stock until the market changes and the investment begins to recover from the depressed state.
As with all investment strategies, going for a good closing price in hopes of making a profit at a later date does involve a degree of risk. However, accurate projections regarding the performance of the stock can help to keep the risk at a minimum, as well as help pinpoint the best time to purchase the option at the best closing price.
