Why are the share close and open different?

Adyinvestment

Looking at individual stocks why is the days "Open" price different to the previous days "Close" price?

eskbanker

Trading isn't confined to exchange opening hours:

https://www.investopedia.com/terms/e/extended_trading.asp
https://en.wikipedia.org/wiki/Extended-hours_trading

bowlhead99

Markets are a system of matching buyers' bids to seller's offers.  In simple terms, the prospective seller may hope to sell for 100p but would accept a bid of 97.5p, because if he doesn't take that price he may have to accept even less later. The buyer may hope to pay only 95p but be willing to bid 97.5p because if he doesn't pay that price he might have to pay even more later. So in that case the shares would change hands at 97.5p. 

However, just because the mid price between the maximum available bid and minimum acceptable offer for a given size of transaction was 97.5p when the market closed today at 4.30pm, it doesn't mean everyone will put in those same amount of bids and offersfor the same prices tomorrow morning at 8am when there has been some news overnight about the company or its competitors or the wider market or the economy or the government etc. 

So tomorrow morning you might not be able to find anyone who will pay more than 90p, so there won't be any trades at 97.5p.  Or with positive news overnight, nobody will sell for less than a pound and buyers will have to increase their bids to get the quantity of stock they want.

Adyinvestment

Thanks...I get it now.

wmb194

In addition to what Bowlhead wrote, there are five minute auctions before the start of normal trading and after normal trading has finished*. The opening price is the outcome of the morning auction and the closing price is the outcome of the closing auction. Normally only professional traders / firms have access to these auctions. 

The morning auction usually takes some account of the news that's been released between the previous day's close and the open, but is commonly a reaction to the RNS announcements made at 7am e.g., annual results and interim statements.

*A couple of years ago a two minute auction at midday was added.

Thrugelmir

Shares are trader through intermediaries, market makers. You are rarely selling directly to another party at the retail investor level. Stock exchange RNS announcements for the London market can start as earlier as 7 in the morning. This may influence the share price. In addition markets around the globe will take a lead from each other. Someone is investing somewhere 24 hours a day. 

bermudianmark

Market makers take into account events since the last close and mark prices up or down in response.

Linton

A further reason I understand is that the closing prices may be misleading if very large deals involving significant discounts are pushed through at market close.

comment_as...

Worth mentioning that they can 'gap' throughout the day. One trade might be at £10 and the next at £5 at any time, not only if there was a night in-between the two.