For a long time, everybody participating in online stock trading remained on high alert between 9.15- 3.30 pm. As the official market timings, one could only take part in stock options trading, or security investing of any time between this window. Many traders must have been glad to take a rest from extremely high levels of stress
But those days are long gone. Today, unknown to many novice investors, many stock markets in the world, including India have a system of allowing trader participation before and after the market opens, with Pre-Market, Post-Market and After-Market trading. Earlier, this was the priveledge of an institutional trader, but the advent of online stock trading has changed everything.
The session extends from 9:00 am to 9.15 am. During the first seven methods of the session, traders will be able to place their buy and sell orders on equities only. Futures and Options trading will not be allowed during this period.
The next 8 minutes will include an order matching session and a buffer session to ease the transition to the normal session.
This was introduced in 2010, for the following reasons:
Better Price Discovery, including adequate absorption of overnight news for the opening price.
To reduce Volatility
Post-Market TradingThis session extends from 3.40 pm to 4.00 pm. Like Pre-Market Trading, the Post-Market trading session does not allow futures and options trading.
During this session, traders are allowed to place a buy-sell order for chosen equity that will be executed at the closing price only.
After-Market Trading timings depends upon broker to broker, and typically allowed for all types of trading, including futures and options trading.
This is simply a facility to place an order which will then be added to the queue and executed when the markets open the next day.
Pros and Cons:
Placing an After Market Trade allows you to take advantage of a major event that’s likely to affect stock prices. However, this also depends upon the broker. Some Broker will execute your trade in the order in which they were given, resulting in a delay of a couple of seconds that will change the price of the security. At highly volatile times, this could be a massive price change that could result in a major loss.
In such a situation, it might be best to take place an order first thing in the morning.
The risk can be reduced by using stop limits. We covered this topic extensively in a previous post.
Finally, traders should note that this facility is only recommended for those who cannot track or get access to the market during the day. Under the present situation, it is a far better idea to trade when the market is open rather than outside of it.
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