For any investor in the stock market, understanding the pre-open market session, also known as the pre-opening session, is crucial. This 15-minute window, occurring before regular trading hours (pre-market session time), offers an opportunity to gauge market sentiment and influence the opening price of stocks. Let’s understand the details regarding the pre-open market session:
What is the Pre-Open Market Session?
It is like a trailer before all the busy action starts in the stock market. The pre-opening session lasts for 15 minutes (pre-market session time). It allows investors to place orders (pre-open market session activities) before the regular trading hours start, typically at 9:00 AM and ending at 9:15 AM in India. This pre-market session facilitates two key functions:
- Order Placement: Investors can express their early-morning views by placing orders at desired prices (limit orders) or at the current market price (market orders). This pre-opening session activity sets the stage for the day’s trading.
- Price Discovery: Through a detailed process of matching buy and sell orders, the pre-open market session helps establish an equilibrium price for each stock based on current supply and demand. This price discovery mechanism contributes to a more informed market opening.
How Does Pre-open Session in Share Market Help Reduce Volatility?
Volatility, the ever-present companion of the stock market, can be mitigated through the pre-open market session. Here’s how:
- Early Order Expression: The pre-opening session allows investors to react to overnight news or announcements by placing orders early. It stops too many orders from rushing in when the market first opens, which could reduce price swings.
- Gradual Order Matching: Instead of a burst of activity at the market opening, the pre-market session facilitates a gradual matching of orders. This smoother transition helps to stabilize prices and minimize volatility.
- Equilibrium Price Identification: By matching buy and sell orders, the pre-open market session assists in finding a fair opening price that reflects investor sentiment. This agreed-upon price makes it less likely to have significant price differences when the market opens.
Stock Market Timings in India: Break-Up of the Pre-Open Market Session
The 15-minute pre-market session in India is further divided into two distinct phases:
1. Order Collection Period (9:00 AM – 9:08 AM):
- This pre-opening session window allows investors to place, modify, or cancel orders.
- It’s a planning phase where investors strategize their daily moves.
2. Order Matching Period (9:08 AM – 9:15 AM):
- In the pre-market session phase, before regular trading hours commence, the exchange processes buy and sell orders to set the initial price for each stock. This establishes a starting point for trading activity once the market officially opens.
- This price discovery process sets the tone for the regular trading session. How is the stock’s opening price achieved in the pre-open market session?
The opening price of a stock in the pre-market session isn’t determined by chance. An algorithm analyzes the “order book” generated during the session. This order book contains all placed orders with their associated prices and quantities. The algorithm then calculates the price where the total quantity of buy orders matches the total quantity of sell orders. This calculated price becomes the stock’s opening price for the regular trading session.
The Bottom Line
The pre-open market session offers valuable insights and strategic advantages for investors in the Indian stock market:
- It provides an early opportunity to express market views and participate in price discovery.
- It contributes to a more stable market opening by reducing volatility and establishing a fair opening price.
- It allows investors to consider the market sentiment during the early morning hours, assisting them in making informed decisions about their investments.
While the pre-market session is a valuable tool, it’s important to remember that it’s just one piece of the puzzle. Combining insights from the pre-market session with thorough research and analysis can empower you to make informed investment decisions.
FAQ
What is the time of the pre-open session of BSE?
In the Indian stock market, the BSE's pre-open session takes place between 9:00 AM and 9:15 AM, allowing investors to place orders and influence the opening price of stocks before regular trading begins. Remember, this is a 15-minute window to early participate in the market.
Is it possible to purchase shares during the pre-open session?
Certainly, you have the option to submit orders to purchase shares during the pre-open session. (9:00-9:15 AM). However, the orders are matched, and trades are confirmed once the session ends. It is important to note that this session sets the opening price, but actual execution happens later.
How do you order in the pre-open market?
During the pre-open market (9:00-9:15 AM), you can place limit orders at specific prices or market orders at the prevailing price. These orders are collected but only executed once the session ends. Remember, you're setting the stage for trading, not buying immediat
I’m Archana R. Chettiar, an experienced content creator with
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