(BUY ON CLOSE), is an investor and trader strategy used in financial markets, wherein participants purchase securities at their closing prices of a trading session to execute trades at last available prices before closing of market for day. By understanding its concept and potential benefits, investors can make informed decisions to optimize their trading strategies and ensure optimal returns from investments.
Buy on Close orders instruct a broker or trading platform to purchase specific securities at their closing prices for that trading session, which are determined by last trades executed just prior to officially shutting down of the market. Please keep in mind that closing prices may differ from current market prices due to factors like liquidity and volatility influencing these trades.
Execution Process
For investors to successfully employ the Buy on Close strategy, investors need to place an order with their broker or trading platform specifying their securities of interest and indicate they should trade at closing price. In order to guarantee timely execution, submit orders at least 48 hours before market close.
Benefits
The Buy on Close strategy offers numerous advantages for investors. First and foremost, it allows them to participate in any price movements which might occur during trading sessions by placing trades at or just before closing prices - potentially capitalizing on any last minute fluctuations and creating opportunities to profit from any favorable changes that might take place during trade sessions.
Buy on Close strategies offer investors peace of mind. While placing orders at market price can cause execution price variations to arise, buying at closing price ensures an instantaneous entry point and can help traders who wish to prevent price slippage or unpredictable market conditions from entering unknowingly into transactions.
Before embarking on any strategy like Buy on Close, investors should carefully consider its implementation. One important consideration should be liquidity of a security - less liquid securities may experience wider bid-ask spreads near market close, which may affect execution prices and create further trading frictions.
Buy on Close is a trading strategy which allows investors to buy securities at the closing price of any trading session. By understanding its definition, execution process, benefits and considerations associated with it, investors can make more informed decisions and incorporate this trading approach into their overall approach to trading. As with any trading strategy it is vitally important that individual risk tolerance be assessed prior to engaging with this trading approach and professional advice sought if needed.