Lesson 14 of 31 · Zero to reading a chart

Open vs Previous Close: Every "+5%" Starts Somewhere

Every percentage on a stock is measured from yesterday's close, not from this morning's open - two different numbers, on two different days, and they are never in the same place.

You have seen a stock described as up five percent. Up five percent from what?

Most people assume it is from where the stock started this morning. It isn't.

Every trading day leaves behind one number. At four o'clock the bell rings and trading stops. The last price it traded at is the close.

The next morning, at nine thirty, the bell rings again. The first price it trades at is the open. Two different numbers, on two different days.

The percentage you read on your screen is measured from yesterday's close. Not from this morning's open.

Yesterday's close is the line. Today's price is measured against it. Every percentage you see on a stock works this way.

Here is a real chart. Two days, side by side, one candle each. This line is yesterday's close. And this dot is today's open.

Look where they are. They are not in the same place.

So before a single trade happened today, the stock is already up against yesterday. That distance did not happen during the day. It happened while the market was shut.

Same day, now minute by minute. The circle is the nine thirty bar. The open. The line running all the way across is yesterday's close.

Everything you watch today happens above or below that line. Up here, the stock is up on the day. Down there, it is down. Same line, all day long.

The open is where today started. The previous close is where yesterday finished.

The percentage compares today's price to yesterday's finish. Not to today's start.

Here is the mistake, and it is a common one.

Somebody sees a stock up eight percent. They open the chart, and it is falling all morning. And they think the number is wrong.

It isn't. It opened up eleven percent from yesterday's close. And it has been sliding since.

Up on the day. Down all morning. Both true. The number was never wrong. It was measuring from a different place than they were looking.

Open any chart tomorrow. Find those two numbers before you look at anything else.

Yesterday's close. Today's open. Then read the rest.

Check yourself

What is the open?

The first price at nine thirty.

What is the previous close?

The last price before the bell yesterday.

Up five percent. Measured from which one?

Yesterday's close.

Next lesson: Closed at $10. Opened at $12. Nobody traded $11..

For learning only. Not financial advice, not signals, not stock picks.