It Moves In The Night

Hi sorry if this is a silly question or two basic or been asked before but I couldn't find anything about it on here.

What goes on with a share or even the FTSE100 (UKX) when it closes one night and opens at a totally different price the next day? Shouldn't it follow on from the previous day, otherwise it is like it is being bought and sold in the night so by morning it is a different price totally. For instance the FTSE100 closed last night at 5665 yet when you look at the chart it looks like it opened today at 5728.

Basically why dont shares stop at a price one night and start from that price the next day? What is happening that makes this happen?

Any info appreciated.

Quite simply, a share or index 'gaps' because overnight information has changed, for example good or bad news out of the US or Asia, or perhaps a company's results released at 7am, before market open. This changes the (perceived) value of the instrument, although the market is not open, hence it 'jumps' up or down when it can next be traded.

You can get an idea of how the overnight value of, say, the FTSE changes if you look at some spreadbetting firms who chart their 24hr quote rather than the market value, alternatively look at a forex chart, since currencies trade 24 hours generally without gaps, and consider the gaps that would appear if GBPUSD was just traded London hours, for example.

happyhappyhappy said:

Hi sorry if this is a silly question or two basic or been asked before but I couldn't find anything about it on here.

What goes on with a share or even the FTSE100 (UKX) when it closes one night and opens at a totally different price the next day? Shouldn't it follow on from the previous day, otherwise it is like it is being bought and sold in the night so by morning it is a different price totally. For instance the FTSE100 closed last night at 5665 yet when you look at the chart it looks like it opened today at 5728.

Basically why dont shares stop at a price one night and start from that price the next day? What is happening that makes this happen?

Any info appreciated.

Click to expand...

No such thing as silly question. Just to add to what Jack o' Clubs already said, at a really basic level, it happens because the price of a stock is set by market makers. Individually they can choose what price to buy/sell at, and as there are several market makers per individuak stock, collectively they set the stock's price - what you see on a quote screen. If listed company ABC is having a quiet day, with no news and not much buying or selling, the market makers may sit there not chaning their bids/offers. After the close, say the factory burns down or the board's private jet crashes, and the news is announced some time between the close and the next day's open. Then the market makers might just open at a much lower price (the stock "gaps down"), and take it from there. Maybe the price is marked down heavily on open but investors actually welcome the death of the entire board (quite likely in a lot of cases Then the buying pressure will move the price back up and it could "fill the gap". Or not.

Jack o'Clubs said:

Quite simply, a share or index 'gaps' because overnight information has changed, for example good or bad news out of the US or Asia, or perhaps a company's results released at 7am, before market open. This changes the (perceived) value of the instrument, although the market is not open, hence it 'jumps' up or down when it can next be traded.

You can get an idea of how the overnight value of, say, the FTSE changes if you look at some spreadbetting firms who chart their 24hr quote rather than the market value, alternatively look at a forex chart, since currencies trade 24 hours generally without gaps, and consider the gaps that would appear if GBPUSD was just traded London hours, for example.

Click to expand...

Various sites send me predictions of what the ftse will open at ie this morning they predicted 57p up opening. These come in only a few minutes before 8am.

Would it be possible to buy the FTSE100 via your broker before 8am as they do allow some deals outside market hours and take advantage just before the rise happens (assuming the prediction is going to be right of course), so that you benefit from the rise or am I missing something like for instance the broker having already adjusted their prices before opening at 8am?

happyhappyhappy said:

Hi sorry if this is a silly question or two basic or been asked before but I couldn't find anything about it on here.

What goes on with a share or even the FTSE100 (UKX) when it closes one night and opens at a totally different price the next day? Shouldn't it follow on from the previous day, otherwise it is like it is being bought and sold in the night so by morning it is a different price totally. For instance the FTSE100 closed last night at 5665 yet when you look at the chart it looks like it opened today at 5728.

Basically why dont shares stop at a price one night and start from that price the next day? What is happening that makes this happen?

Any info appreciated.

Click to expand...

It's not fair is it!

Alice thought she had never seen such a curious croquet-ground in her life; it was all ridges and furrows; the croquet balls were live hedgehogs, and the mallets live flamingos, and the
soldiers had to double themselves up and stand on their hands and feet, to make the arches.

The chief difficulty Alice found at first was in managing her flamingo; she succeeded in getting its body tucked away, comfortably enough, under her arm, with its legs hanging down, but generally, just as she had got its neck nicely straightened out, and was going to give the hedgehog a blow with its head, it would twist itself round and look up in her face, with such a
puzzled expression that she could not help bursting out laughing; and, when she had got its head down, and was going to begin again, it was very provoking to find that the hedgehog had unrolled itself , and was in the act of crawling away; besides all this, there was generally a ridge or a furrow in the way wherever she wanted to send the hedgehog to, and, as the doubled -up soldiers were always getting up and walking off to other parts of the ground, Alice soon came to the conclusion that it was a very difficult game indeed.

The players all played at once, without waiting for turns, quarrelling all the while, and fighting for the hedgehogs; and, in a very short time the Queen was in a furious passion, and went stamping about, and shouting, "Off with his head!" or "Off with her head!" about once a minute.

Alice began to feel very uneasy: to be sure, she had not as yet had any dispute with the Queen,
but she knew that it might happen any minute, "and then", thought she, "what would become of me?"

They are dreadfully fond of beheading people here: the great wonder is that there is anyone left alive!"

happyhappyhappy said:

Various sites send me predictions of what the ftse will open at ie this morning they predicted 57p up opening. These come in only a few minutes before 8am.

Would it be possible to buy the FTSE100 via your broker before 8am as they do allow some deals outside market hours and take advantage just before the rise happens (assuming the prediction is going to be right of course), so that you benefit from the rise or am I missing something like for instance the broker having already adjusted their prices before opening at 8am?

Click to expand...

Exactly. Sadly no such thing as easy money .

happyhappyhappy said:

Basically why dont shares stop at a price one night and start from that price the next day? What is happening that makes this happen?

Click to expand...

Order flow. The Market Makers have the immediate future laid out in front of them. All orders placed for market open are (a) an indication of what the likely directional bias is going to be (b) a guide to the potential strength of that bias and its duration and (c) an opportunity to leverage their knowledge of this upcoming action to their advantage. The days of making money on the spread alone are long, long gone. Can't blame them.

You might be able to do that with some spread betting firms. Some offer 24 hour quotes, but spreads will be wide when the futures are good, and they'll cancel your bets if you get too good.

happyhappyhappy said:

Various sites send me predictions of what the ftse will open at ie this morning they predicted 57p up opening. These come in only a few minutes before 8am.

Would it be possible to buy the FTSE100 via your broker before 8am as they do allow some deals outside market hours and take advantage just before the rise happens (assuming the prediction is going to be right of course), so that you benefit from the rise or am I missing something like for instance the broker having already adjusted their prices before opening at 8am?

Click to expand...