Talk to a full-time stock market trader and you will know they are morning people. Glued to TV screens and terminals is how their day starts. Before anything, a novice investor must find out the timings of the market.
When does the stock market open? If your answer is 9.15 am, you are only partly correct. There are crucial 15 minutes called pre-market trading that starts at 9.00 am. What is it really? Read on.
Content:
What is Premarket Stock Trading?
Stock market makes its moves on the news. A lot pans out after the market closes and the next day starts. If the market reacts to all news at once, the volatility in the market may freeze your blood. This is why stock exchanges conduct a pre-market session that absorbs major events or announcements made overnight. For example, merger or acquisitions, open offers, credit rating downgrades or even trends in the global markets.
Next time you track the stock market, do notice the premarket stock trading. You will see wild swings in news-based stocks and benchmark indices such as Sensex and Nifty. These swings get stable as the clock strikes 9.15 am.
Why do we witness such swings? Consider this: Stock A has won a crucial contract that will boost its earnings. The announcement was made late at night. Now everyone would want a bite of the stock – as early as possible.
If you place the order during pre-market session, chances are you will bag the stock right at the opening price. Any rally that follows in the regular market will benefit you the most. Since a lot of traders aim for it all at once, it fluctuates the stock price by leaps and bounds during pre-market sessions.
Thus, the pre-market stock trading ensures stability in the main market and helps discover the correct price of the stock based on the number of buyers and sellers.
Both the good and bad thing about the stock market is its volatile nature. But even that can also be understood. How, you ask? Click here to get the explanation.
Premarket Timings
Pre-market trade starts at 9.00 am and last for 15 minutes. These 15 minutes are divided into three slots based on some operational functions:
1. Order Collection Period
It lasts for 8 minutes starting from 9.00 am to 9.08 am. One can execute the following three functions during this period:
- Placing an order to buy or sell.
- Modifying an existing order placed after market hours.
- Cancelling an existing order.
To place an order, you need to have a Demat account. If you don’t have it already, then you are just a click away. Get it immediately for FREE!!!
2. Order Matching and Trade Confirmation Period
It lasts for 4 minutes starting from 9.08 am to 9.12 am. Order matching starts right after the collection to determine a single price that becomes the opening price. The NSE defines following three sequences of the order matching:
- Eligible limit orders are matched with eligible limit orders
- Residual eligible limit orders are matched with market orders
- Market orders are matched with market orders
Limit orders are those in which you place the order at your desired price. In market orders, you get the prevailing price available at the moment on stock exchanges.
3. Buffer Period
It lasts for 3 minutes from 9.12 am to 9.15. It ensures a smooth transition to the opening session. It addresses and resolves any issues in the previous phases before normal trading hours start.
Premarket Order – How to Place it?
The process to place a pre-market order is not different from a regular buy and sell order via Aliceblue. However, you need to keep the following things in mind:
- Place the order only between 9.00 am to 9.08 am. All overnight orders also get executed during the same period.
- Only limit and market orders can be placed in pre-market stock trading.
- Place your order within the +/- 20 percent range of the last trading day’s closing price.
If you are a little rusty on market order and limit order, we’ve got you covered. Read about it directly by clicking here.
Once you are done gathering all the information about pre-market trading. The next step you should take is have a demat account and start trading.
Do you know, there are more forms of online trading that you should know. Click on the links provided below to read about them in detail.
We hope that you are clear about the topic. But there is more to learn and explore when it comes to the stock market, and hence we bring you the important topics and areas that you should know:
Quick Summary
- The pre-market stock trading ensures stability in the main market and helps discover the correct price of the stock based on the number of buyers and sellers.
- Pre-market trade starts at 9.00 am and last for 15 minutes. These 15 minutes are divided into three slots based on some operational functions:
- Order Collection Period (9.00 am to 9.08 am)
- Order Matching and Trade Confirmation Period (9.08 am to 9.12 am)
- Buffer Period (9.12 am to 9.15)
- The process to place a pre-market order is not different from a regular buy and sell order via Alice blue. However, you need to keep the following things in mind:
- Place the order only between 9.00 am to 9.08 am. All overnight orders also get executed during the same period.
- Only limit and market orders can be placed in pre-market stock trading.
- Place your order within the +/- 20 percent range of the last trading day’s closing price.
