Are you a regular trader? So, what time do you start trading? Oh, did you just say 09:15 hrs? What if we say that you can even trade before 09:15 hrs? Yes, you have heard it right! Though the actual trades start after 09:15 hours, you can place your orders even before 09:15 am.
Yes, you can even place orders before 09:15 am by trading in the pre open stock market. But when can you start trading in the pre open trade market? What are the benefits that the pre open market offers to investors? Here in this article, we are going to give you an understanding about prepone stock market and associated details:
What is a pre open trade market?
The pre open market as the name suggests is the trading that is initiated before the market trading hours. But, only a few people participate in the trade during the pre open market session thus the volume of trade experienced during these hours is comparatively very less than the volume of trade experienced during the actual market trading hours.
The pre open market trading commences just before the actual opening of the trade market that is between 09:00 hrs and 09:15 hrs for both the stock exchanges (National stock exchange and Bombay stock exchange). You should also read up on the Nifty midcap index today updates.
The background of pre-open market trading
Pre-open market trades are performed on computerized systems and alternative trading systems over a communication network. Premarket trading is mostly used by the traders for the below-mentioned reasons:
- Rumors and breaking news such as political instability, overseas events, statistics, etc. can cause a drastic change in the price value of a share. Pre-open market trade can help in getting ahead of such news that can affect the price of the stocks.
- Traders also use the pre open market to compare the demand and supply of stocks to find out where the trading will head towards.
- In situations, when the earnings of a company are released after the closing of the market, the value of the stocks is prone to go upscale or downscale based on the results. In such cases, pre open markets give the traders an opportunity to buy and sell the stocks before the actual market opens for trading purposes.
Who is allowed to trade in the pre-open market?
Almost everyone can trade during the pre-open market session. But in some cases, the brokers do not enable the pre-trading feature in your account because they do not wish to have more people trading before and after the closing of the market, especially when the market is highly volatile.
However, in such a case, if you wish to try your hands in the pre-open market, you are required to contact the broker to set the pre-open market feature to standard so that you can get started with pre- and post-market trading sessions.
What are the timings of the pre-open market?
- 09:00 hrs to 09:08 hrs: Order entry session
During these 8 minutes, a trader can consider placing their order. Even retail traders can place their orders during this time period. But these eight minutes only stand valid for collection of orders and you can place or cancel the stock orders but you cannot expect a settlement to occur during this duration.
- 09:08 hrs to 09:12 hrs: Order matching session
This time span of four minutes is used for matching the orders. One cannot place any new order or cancel any order placed before during this tenure. Orders that are bought and sold before are matched during this time gap to reach an equilibrium state of opening of the market process.
- 09:12 hrs to 09:15 hrs: Buffer session
This time period is known as the cushion period wherein no activity prevails. But in the case of any technical glitches or abnormalities, the cushion period is used for fixing any such glitches.
- 09:15 hrs: Trading session
The actual trading begins at 09:15 hrs and you can go ahead to trade in any stocks of your choice.
How do pre-open market sessions cut down the volatility rate?
The pre-open market session aids in stabilizing the share value of various companies by figuring out the actual supply and demand of a particular stock. During this phase of finding out the demand and supply, an equilibrium price is finalized which brings stability. This brings stability because the trade price is not left to be decided based on the trends but by the equation between demand and supply.
Prepone market trade gives you the advantage of making your first move even before the opening of the market. However, whatever purchases you make between 09:00 hrs and 09:08 hrs get executed only after 09:15 hrs. But, whatever the case, pre open markets give you operational benefits and also enhance the opening price of stocks. Last but not least, make sure that you also pay heed to associated risks. Happy investing!