Previous Close

What It Is:

Previous close is the price of a stock at the end of the previous trading day. Previous close can also refer to the level of the entire stock market as measured by a major stock index.
 

How It Works/Example:

Over the course of a day as securities are traded, their prices rise and fall based on any number of factors.  At the close of the trading day, when the exchange closes, the stock's final price is reported the next day as the "previous close."
 
A number of stock exchange indices report their daily index levels.   For example, the Dow Jones Industrial Average (DJIA) of thirty of the largest and most widely held public companies in the United States.  Each day, it moves throughout the day, reporting the fluctuations of the stock prices of the companies stock prices within the index.   At the end of the trading day, the Dow Jones Industrial Average is reported.  The following day, it is reported as the "previous close."

Why It Matters:

Using the previous close on a particular stock or an index for the whole market, an investor can monitor the general direction of the market over that single day.   Over a period of time, it can give an indication of the general direction of an individual stock or the index, reflecting larger trends in the market.