Net change represents the difference between the previous trading period’s closing price and the current trading period’s closing price for a given security. Often referring to a daily time frame, net change can be either positive or negative for a particular day. It is primarily quoted in U.S. Dollars, but it can be expressed in any denomination relevant to the traded security.
Key Takeaways
- Net change is the difference between the closing prices from one day to the next.
- It is one of the most commonly reported data points in securities quotes.
- Net change forms the basis for most line charts in technical analysis.
Analyzing Net Change for Better Investment Decisions
Technical analysts leverage net change to chart and analyze stock prices over time using line charts. For instance, if a stock closes at $10.00 in the prior session and $10.25 in the current session, the net change is $0.25 per share. Investors also consider percentage change to assess the significance of price movement relative to the stock’s price.
In most charting platforms, net change automatically adjusts for dividend distributions or stock splits. For example, a stock trading at $60.00 with a 2-for-1 stock split closing at $30.00 will reflect a $0.00 net change in the next session. This adjustment ensures charts are useful for tracking value changes over time but can skew historical data.
Investors must double-check net change values for accuracy before conducting historical research, as erroneous electronic or outdated historical data might not be updated accurately.
Reading and Interpreting Stock Quotes
Many platforms and newspapers provide watch lists and stock tables that list companies’ names, ticker symbols, volumes, highs, lows, close prices, and net changes for previous sessions. Additional details like the 52-week high and low, dividend yield, yield percentage, and price-earnings ratio are often included. Different sources may show slight variances in data, as they derive information from multiple exchanges.
Technical analysts usually prefer real-time electronic stock quotes over outdated information to stay updated on current market trends. Net changes along with percentage changes are typically displayed next to the current price, formatted as: 163.65 -0.45 (-27%). In this example, the first number is the last trading price, the second number is the net change, and the third is the percentage change.
Utilizing Point-and-Figure Charts for Price Movement Analysis
Point-and-Figure charting focuses solely on net change, ignoring current price, time, or volume. These charts use columns of ‘X’s representing uptrends and ‘O’s signifying downtrends, visualizing net changes to illustrate clear trends. Since they are based on price change and not on time, Point-and-Figure charts are adept at revealing directional price patterns effectively.
Other technical indicators also use net change for calculating trend strength and identifying potential trading opportunities.
Image by Sabrina Jiang © Investopedia 2021
Related Terms: closing price, percentage change, stock split, dividend yield, price-earnings ratio.
