Definition of a Negative Closing for Stocks
A negative closing in the stock market occurs when a company’s stock ended the trading day at a lower price than it opened with that day. For example, the Apple computer company’s stock would experience a negative closing if its price opened in the stock market at $500, but ended at $450 when the market closed. A negative closing in the stock market can also be applied to multiple stocks through indices such as the Dow Jones industrial average or the Nasdaq in the U.S. In these cases, normal trading hours run from 9:30 a.m. ET to 4 pm ET weekdays.
Usually, when a stock experiences a negative closing, it is said to be in the red. This is because most electronic trading applications around the world represent a negative closing of a stock’s price in a red color. It is indicative of a loss in the stock’s value at the end of that trading day. If, however, the stock’s price closed higher than its opening price in the market, it is said to have experienced a positive closing and is highlighted in green, indicating an increase in value.
Portfolio managers who trade lists of stocks are always interested in knowing stocks' closing prices. Many may hold these stocks in their portfolios. If the stock was bought at a certain price, but ended the day at a lower closing price, the portfolio manager would be said to have experienced an unrealized loss. It is unrealized because it is only a potential loss compared with the closing price. Portfolio managers could in fact hold on to that stock for a while until the price ticks back up, then trade it for a profit. If they do so, they will realize an actual profit. If the stock never recovers, they would trade for an actual loss.
Instead of buying and holding stocks until they can be sold at a higher price, some traders may alternatively borrow and sell a stock they do not own to buy it back at a lower price. This trade practice is called short selling. People who short sell believe a stock is on a downward trend. To make a profit, they borrow and sell the stock at the higher price it is trading at today. For these traders, a negative closing for stocks would very much be an unrealized profit. They would realize an actual profit when they eventually buy back the stock at a lower price.
Negative closings for stocks are based on the standard trading time of the central stock exchanges within a particular region. It is an easier benchmark to analyze the stock performance of a company that trades on that exchange. As it relates to your own trading account, certain portfolio managers may choose to use a different profit or loss benchmark in analyzing the performance of your existing stock positions. They are also likely to focus on a variety of benchmarks related to the bid or ask prices that persist after a few hours as opposed to the benchmark of the stock's closing price.
Victor Rogers is a professional business writer who started his career as a financial analyst on Wall Street. He later expanded his experience to content marketing for technology firms in New York City. Victor is an alumnus of St. Lawrence University, where he graduated with honors in economics and mathematics.