The closing price is more important than the opening price. Knowing this can give you a serious advantage over most other traders. I'm going to show you how to pull profits out of this truth like money being spit at you from a broken ATM machine!

The closing price is more important than the opening price. Knowing this can give you a serious advantage over most other traders. I'm going to show you how to pull profits out of this truth like money being spit at you from a broken ATM machine!

Let's begin.

The closing price is the value set for a given stock by all market participants trading that stock. It is the final consensus of value assigned to a stock on any given day by the crowd. It is the price everyone sees after work. It is the final price displayed on all daily stock charts people research at the end of a given trading day. In the futures market, the closing price is very important because trading accounts are settled based on it.

Institutional and professional traders will trade throughout the day. Their behavior is as follows. At the opening, they take advantage of opening prices by selling high openings and buying low openings. They then close out of those positions as the trading day goes on. What they do day in and day out is to trade against market extremes, also called fading. They are betting on a return to normalcy in any given market. When a stock price reaches a new high and then buy side volume falls, they sell and push the market down. When a stock price reaches a new low and then sell side volume falls, they buy and push the market up.

Amateur and non-professional traders have very different trading patterns than those of professional and institutional traders. Amateur traders make up the majority of market participants at market open. As the day goes on, they slowly subside until all that is left at the end of the trading day are professional and institutional traders. Most amateur traders put on a trade at market open, before work, and then don't check it again until after market close.

Knowing what time of day the amateurs trade and what time of day the professionals trade gives you a huge advantage in the market place! Think about it for a minute. 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 tells you that professional and institutional traders are usually on the opposite side of the trade as amateurs are. So which group should YOU trade with? Why the group that has the most money to invest in the stock market because they can move the stock the most. This means that you want to be on the side of the trade that professionals are on. Trade with the professionals, not against them.

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. Why? Because this gives you a signal that professional traders are fading against your long position.

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