Open - Stock Trader Glossary

Term "open" is used to refer to the start of the trading day. In the United States, the stock market officially opens at 9:30 a.m. Eastern Time (ET) on weekdays, and closes at 4:00 p.m. ET. Before the market opens, there is a pre-market trading session that begins at 4:00 a.m. ET and runs until the market officially opens at 9:30 a.m. ET. During this pre-market session, investors and traders can place orders to buy or sell stocks and other securities, but liquidity is generally lower than during regular market hours, meaning that there may be wider bid-ask spreads and less trading volume.

At the start of the trading day, the opening price of each stock or other security is established through an auction process called the opening auction. During this auction, buyers and sellers enter orders to buy or sell shares at various prices, and the exchange uses an algorithm to match these orders and determine the opening price. The opening price is the first price at which the security trades on that day, and it can be influenced by a number of factors, including news events, economic data releases, and pre-market trading activity. For example, if a company announces better-than-expected earnings results before the market opens, it could cause traders to place more buy orders for the stock, driving up the opening price.

The opening price is an important benchmark for traders and investors, as it can set the tone for the rest of the day's trading. A strong opening price may signal bullish sentiment and lead to further buying, while a weak opening price may indicate bearish sentiment and lead to further selling. However, it's important to keep in mind that the opening price is just one data point in a complex and dynamic market, and it can be influenced by a wide range of factors.

Beyond the opening price, the market also establishes other key prices throughout the trading day, such as the intraday high and low, and the closing price. The closing price is particularly significant as it represents the final price at which a security trades during the regular trading session, providing a benchmark for after-hours and next-day trading. Similar to the opening price, the closing price can be impacted by end-of-day trading strategies, news releases, and broader market sentiment.