Net change definition
What is net change?
Net change is the difference between the closing price of the current trading session, compared to the closing price of the previous trading session. Net change can be positive or negative, as it represents whether the markets are up or down on the previous day.
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Net change in shares trading
While it can be used in a range of markets, net change is most commonly used in share trading. Traders will often use net change to assess the daily deviations in a stock’s price. They will then use this information to determine if they should open a long or short position – which would depend on whether the net change has been positive or negative.
Net change can also help a trader decide if they should close their active positions, as it can help assess which way the markets might move during the current trading session.
How to calculate net change
You can calculate net change by subtracting the current day’s closing price for an asset from the closing price of the previous day. For example, if company ABC’s stock closes at $125 per share today – after closing at $130 the previous day – then there has been a negative net change of $5 and you might decide to go short.
If, however, the price had increased to $135, up from $130 yesterday, then there has been a positive net change of $5. In this case, you might decide to take a long position.
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