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In Finance, what is Net Change?

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  • Written By: A. Leverkuhn
  • Edited By: Andrew Jones
  • Last Modified Date: 31 October 2016
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Net change is the difference between closing stock values on two consecutive days. On each trading day, a stock opens (starts out) at one value and closes at another. Net change shows the difference between where the stock is at the end of a day, and where it was at the end of the day before. The net change of a stock represents a very short term shift in value, and helps stock analysts make sense of a wide range of financial events for a particular stock, a sector, or the market as a whole.

Looking at net changes is useful in deciphering all kinds of stock charts and graphs based on a stock value’s change over time. Day traders and other investors often use diverse charting tools in order to look at how a stock changes value over days, weeks, months, and years. A net change, or a series of net changes, can be a useful part of technical analysis, stock monitoring that helps investors make choices about buying or selling stocks.

In conventional stock offerings, there are some common events that investors look for in the growth or change of a stock. One of these is a dividend payout. The other is a stock split or reverse stock split.

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The dividend is a payout from the company to its stockholders. Dividend paying stocks are often attractive to investors because the dividend can offset any short term changes in value. Dividend payments also add up over time. It’s important to note that a dividend payout will not affect the net change of a stock when it is paid out.

A stock split is when the company doubles its amount of shares, thus cutting the price of a share in half. The stock split does not affect net change when it happens. A reverse stock split is just the opposite: the company halves the number of outstanding shares, doubling the value of a share. The reverse stock split also does not affect the net change of the stock on the day that it happens.

Keeping track of net changes is important to investors who may be thinking about selling a stock, or buying more of a stock, on a short-term basis. Net change is generally denominated in dollars and cents, instead of percentages. Other reports on stock value may include a percentage of gain or loss over a trading day.

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