Yesterday's closing price as an intraday reference

[Fairman]

Yesterday's closing price as an intraday reference

Most intraday traders mark yesterday's high and low and ignore the close. I think the close deserves a line on the chart too.

The daily close is where the last group of participants agreed on value before the day rolled over. When price trades back to it the next session, it often acts as a pivot. Not always a hard level, more like a place where the market decides which side it wants to be on.

The obvious complication is the server time. The close on your chart depends on when your broker rolls the day. A broker on New York close time gives you a different closing price from one running on GMT. If you use the close, use a chart where the day ends at 5pm New York, because that's the one most of the market watches.

How I'd use it: note whether London opens above or below the close. If price opens above and holds, a dip back to the close is a reasonable area to look for longs. If it opens above and then trades below the close without much fight, the morning has already changed its mind, and longs become harder to justify.

It's not a setup on its own. It's context. But it's free and it takes one horizontal line.

[Fairman]

The settlement price on CME currency futures is another version of the same idea and some people prefer it. It's fixed at a specific time each afternoon in Chicago, so it's less arbitrary than a broker's server close. The difference between the two is usually small on the majors, but on a day with a late move after the settlement the gap can be several pips. If your levels need to match what futures traders are watching, the settlement is the one to use. If you're only trading spot through a retail broker, the New York close is fine. Whichever you pick, label it on the chart so you don't mix the two up when things get hectic.

[Fairman]

Track how far price gets from the close before it comes back to it, if it comes back at all. On a trend day it might never return. On a rotational day it might cross it four or five times. After a month or two of noting this, you'll have a rough sense of which days it matters on. A lot of traders find that when the Asian session already crossed the close a couple of times, it becomes a weaker reference for London, because that value has already been tested and accepted. Writing a single word in the desk note each morning, crossed or not crossed overnight, is enough to start collecting this without much effort.

[Fairman]

Gaps change the picture on Mondays. Friday's close and the Sunday open can be quite far apart after weekend news, and the Friday close then works more like a gap fill target than a pivot. That's a different trade with different behaviour. Treat Monday separately, or simply leave the line off on Mondays so it doesn't pull your attention toward a level that has a different meaning that day. There's also the holiday case. When one of the main centres was closed the previous day, the close was made on thin volume and it tends to carry less weight as a reference the next morning. It can still show up as a pivot, but it's weaker, and the usual levels from the day before that can be more relevant.

[Fairman]

Put it together with yesterday's range and you get a quick read on where the close sat. A close near the high of the day says buyers held control into the end. A close in the middle says nobody won. That location can tell you something about the opening hour. A strong close near the high followed by a weak open below it is often a sign that the late buying didn't carry over. A middle close with no clear direction is usually a day where the first real move of London sets the tone. On the yen pairs this is a little less tidy, since Tokyo trading happens right after the New York close and can move price away from it quickly.

[FXS London Scalper]

Yesterday's close is underused as a reference. One detail is which close: the 17:00 New York close is the standard for FX, but some traders mark the London close at 16:30 London as well. On days when New York moved a lot after London closed, the two can be far apart, and London traders often react to their own close first. Marking both and watching which one gets respect in the first hours can be a quick way to see whose positions are driving the morning.