Everything you need to know about the Pre-Market Session of the Stock Market
Pre-market sessions or trading are trades that happen prior to normal hours of trade in the market. In India, the timings for “Pre-Open Market” in the National Stock Exchange and Bombay Stock Exchange is 9:00 A.M. to 9:15 A.M. In these crucial fifteen minutes, and one would look for improving volatility.?
Pre-market sessions are between 8:00 A.M. to 9:30 A.M. One can expect lower trade volumes as compared to normal sessions. As an investor, it is best to respond to off-hour news during the pre-market sessions.? For Example: An organisation would have released news about its earnings, and a pre-market trader may prefer to sell or buy quickly before the market reacts.
Another important fact you might not want to miss is that it could be risky for new investors and traders. It is commonly observed that high-end investors and institutional traders transact during these hours. These sessions are open to anyone. There are a few interesting facts that are recurrent in these sessions.? One has to know the following:
The transactions pertaining to the Pre-Open Market sessions?are computerised or through other trading systems. The market direction is studied by the investors before the transactions are executed. This action plan sets the directions for impactful trades before the market reacts to current news, external instability in the country, or any other action.?
Additionally, an announcement of good earnings by companies after market closure will lead to a rise or drop in volumes and prices of stock the next day. As a pre-market trader, you might want to benefit from the market volatility by pre-market buying or selling.
The trading in this session occurs via an Electronic Communication Network (ECN). So, by placing orders to buy or sell at specified rates, the transactions can be tracked. This helps in improving connections between buyers and sellers. The need for a broker is almost not there! You can expect low liquidity and volatile trading!
The following orders can be placed:
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The quantity and price are specified, and the transaction takes place when the stock or asset reaches a particular price. It is thus called Limit order.?
Here the quantity and the price are not fixed. The prevailing price is the determinant of the transaction. It is thus called as a Market order. There are three slots for the trade.?
The opening time is 9:00 AM. The initial session is for the first eight minutes and is termed as the order collection period. One can amend or withdraw the order at this session.
The next four-minute session is called confirmation or the order matching period. Here, the orders cannot be altered or cancelled, and the ones that are placed get confirmed by the price identification method.?
The final session lasts for three minutes and helps in the transition of transactions to the usual market sessions.
Another fascinating fact is that one can observe that pre-market sessions have more competition. This is because the number of investors is less. Non –compatible ECN can cause blocks and make transactions sluggish. The rules are different for pre-market trading. Pre-market trading is often considered as an opportunity for sophisticated traders who are more experienced considering the risk involved.?
Some of the tips one could consider to take advantage are to take the help of professionals or effective tools. Financial goals have to be defined prior to trading. The tolerance of risk has to be visualized. Tools like the asset allocation calculator can be handy! It would help understand the profiles in the portfolio. Happy Investing!!!