Learn Formula For Calculating The Net Change - Cuemath

Net Change Formula

The net change formula helps in calculating the net change, which is defined as the difference between the final and the initial amount or quantity. The net change is reflected in a numerical amount and can be positive, negative, or at zero. In trading, the net change is the difference between the closing price of the current trading session, compared to the closing price of the previous trading session.

• Net change is the most commonly reported data from securities quotes.
• Net change forms the basis of most line charts in technical analysis.

Let's look into the Net Change Formula using some solved examples in the following sections.

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What is Net Change Formula?

The net change formula is used in order to calculate the change in the value of anything from its previous values. It is mainly used for calculating the change in the closing price of the stocks, mutual funds, bonds, etc. from its closing price on the previous day.

The net change formula is given as,

Net Change Formula = Current Period’s Closing Price – Previous Period’s Closing Price

where,

• Current Period’s Closing Price = Closing price at the end of the period when the analysis is done.
• Previous Period’s Closing Price = Price at the beginning of the period for which analysis is to be done.

Net Change Formula in terms of Percentage is given by,

Net Change (%) = [(Current Period’s Closing Price – Previous Period’s Closing Price) / Previous Period’s Closing Price] × 100

Let's take a quick look at a couple of examples to understand the Net Change Formula

Solved Examples Using Net Change Formula

1. Example 1: The closing price of a stock on day one (Monday) is $10.00. On day two (Tuesday), the stock closes at $12.00; on day three (Wednesday), the stock closes at $9.50; on day four (Thursday), the stock closes at $9.75; and on day five (Friday), the stock closes at $10.00. Calculate the daily and weekly net change of the stock using Net Change Formula.

   Solution:

   Using Net Change Formula,

   Net Change Formula = Current Period’s Closing Price – Previous Period’s Closing Price

   The net change on day two is +$2.00 i.e, ($12.00 – $10.00)

   The net change on day four is +$0.25 i.e, ($9.75 – $9.50)

   The net change on day five is +$0.25 i.e, ($10.00 – $9.75)

   Answer: Net change over the week is $0.00 i.e, ($10.00 – $10.00) since a trading week is only five days.

2. Example 2: A stock closes at $10.00 the prior session and $10.25 in the current session. Calculate the net change.

   Solution:

   Using Net Change Formula,

   Net Change Formula = Current Period’s Closing Price – Previous Period’s Closing Price

   = $10.25 - $10.00

   = $0.25

   Answer: Thus, the net change is $0.25.

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