How markets work
Auction
Also called Opening auction or Closing auction
A short period where orders are collected and matched at a single price, rather than continuously.
How it works
Exchanges open and close with auctions. Orders accumulate, the exchange calculates the price that will trade the largest volume, and everything executes at that one price simultaneously.
The closing auction is the most important trade of the day in most markets. It sets the official close, which is the price funds are valued at and indices are calculated from, so enormous volume concentrates there.
Where it misleads people
Prices can move sharply into an auction and then settle. Reading the last few minutes before the close as a signal about the next day mostly reads index and fund flows, not opinion.
Related terms
- Market hoursThe window in which an exchange’s main continuous trading session runs.
- ExchangeA regulated marketplace where buyers and sellers of securities are matched under published rules.
- Closing priceThe official price a security finished the session at, usually set by the closing auction.
- VolumeThe number of shares or contracts traded in a period — a measure of how much activity there was.
More in How markets work
- Average daily volume
- Algorithmic trading
- Best execution
- After-hours trading
- Bid-ask spread
- Adjusted close
- Circuit breaker
- VWAP
All 33 How markets work terms · The full glossary, 433 terms
Educational reference only. Nothing here is investment advice or a recommendation to buy or sell anything, and tax treatment depends on your own circumstances and the country you are in.