DEFINITION of 'Net Change'
The difference between the prior session’s closing price and the current session’s closing price for a given security. Net change can be positive or negative and is quoted in dollars. This is what newspaper stock tables typically quote.
BREAKING DOWN 'Net Change'
Technical analysts use net change to analyze stock prices over time. For example, a stock might close at $10.00 the prior session and $10.25 in the current session, which translates to a net change of $0.25 per share. Many traders also look at net change in the context of a percentage change to see how significant the movement is relative to the price.
Net change is automatically adjusted to reflect the impact of dividend distributions or stock splits. For example, a stock that trades at $60.00 has a 2-for-1 stock split the next day and closes at $30.00 the next session will have a $0.00 net change. There are some cases, however, when electronic information may not be updated, so it’s important for traders and investors to double-check that the net change accounts for these events.
Reading Stock Quotes
Many newspapers publish stock tables that include the company name, ticker symbol, volume, high, low, close, and net changes for the previous session. Stock tables may also include the 52-week high, 52-week low, dividend yield, yield percentage, and price-earnings ratio. These tables tend to differ between newspapers, but all publications contain the net change and other basic information for investors.
Modern technical analysts use electronic stock quotes rather than newspapers since they provide real-time information. In these cases, the net change is typically displayed next to the current price along with the percentage change. For example, an electronic quote may look something like “163.65 -0.45 (-0.27%)”. The first number is the last trading price, the second number is the net change, and the third number is the percentage change.
Most stock charts plot a security’s closing price over time, but some charts are focused on price change rather than the actual price. Point and figure charts represent filtered price movements rather than the actual price of a security to show trends.
Point and figure charts contain rising columns of Xs and falling columns of Os that represent an uptrend or a downtrend. Since they’re based on price change rather than time, these charts are ideal for detecting directional patterns and trends in a condensed format rather than looking over a much longer period of time.
Some technical indicators also make use of net change in calculating trend strength and other factors that help traders identify potential trading opportunities.