What is the Closing Bell?

by Investing School on October 20, 2010

Many stock exchanges possess a claxon of some sort that signifies the closing of that trading session. It is traditionally called the closing bell because originally, and still in many markets world wide, the item used is actually a bell. It signals the end of trading for that day and all of the traders that are on the floor must stop doing any and all business until the new session has been opened. It is often referred to as the end of the business day, as well.

However, not every stock exchange uses a bell to close the end of the day’s trading. The term, however, is universally recognized by those in financial circles. For those that do use a bell, the bell is run at the start of the day to signal the start of the business day and that the exchange is open for trading.

As has been seen previously, the stock exchange is a notoriously chaotic place. The market is in constant flux and the use of a loud bell helps to remind traders to stop all business immediately. When the market is hot, doing business after the bell tolls could be to the trader’s advantage if it were possible for him or her to get away with it. In this case, there is a warning bell to let traders know that the final closing bell is close at hand.

If a bell is not used then other loud noises will be used in its place. This can be flashing lights or a sharp sound that gets the attention of all of the traders.

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