Can I Buy Shares In Pre Open Session: A general understanding of the Indian market timings is that they open at 9.15 AM and close at 3.30 PM. But between 9.00 AM and 9:15 AM, the markets are open for 15 minutes.
This is known as the pre-open session. The pre-open session is what goes on internally at the stock exchanges that determine the equilibrium price for that market trading session.
In this blog, we’re going to cover the important points regarding the pre-open session. Most beginners in the market might not be aware of this concept and we are going to talk about it in depth in this blog.
Additionally, we’ll also answer some questions regarding this session such as – What is a pre-open session? How does it work & can I buy shares in pre open session? So read ahead to find out!
What Is A Pre-Open Session?
The pre-open session is a 15-minute period between 9:00 AM and 9:15 AM. This session starts before the trading session begins on the BSE and NSE at 9:15 a.m.
During this session, order collection, order matching, and equilibrium price matching take place. Markets in general are volatile. This is due to various factors, including press releases and public announcements made by the companies.
Pre-Open Market Session – 15-Minute Break-Up
In the 15-minute session, these are the events that take place –
1. Order Entry Session – 9:00 AM – 9:08 AM (8 Minutes)
For the first 8 minutes of the pre-open session, from 9:00 AM to 9:08 AM, the order entry session takes place. During this time, orders are placed to buy and sell stocks or to modify/cancel orders.
Once the session ends, no orders are accepted i.e., after 9:08 am. So if you are looking to enter the market during this time, it’s recommended that you place your order before 9:08 AM within these 8 minutes.
2. Order Matching Session – 9:08 AM – 9:12 AM (4 Minutes)
The next 4 minutes of the pre-open session are for order matching. Between 9:08 and 9:12 am, orders are confirmed and matched, along with the calculations of the opening price of stocks for the normal market session. Keep in mind –
You cannot do anything with your order during this period. This includes buying, selling, cancellation, and modification of your order.
3. Buffer Session – 9:12 AM – 9:15 AM (3 Minutes)
The last 3 minutes of the pre-open session are for the buffer session. Here buffer means adjustments for any irregularities that might have occurred during the previous 2 sub-sessions mentioned above.
The buffer session is also used to shift the market from its pre-open session to the normal market session.
Can I Buy Shares In Pre Open Session?
Yes, you can place orders in the pre-open session. Specifically, you can do it in the first 8 minutes of the session, between 9:00 AM to 9:08 AM, also known as the order entry session.
Keep in mind that the buy order will be placed only if the order price matches the market price of the stock once the normal market session begins. In India, stock exchanges allow for limit and market orders during the pre-market session.
A limit order allows you to place a buy/sell order at a particular price. Market orders allow you to buy or sell spontaneously at the current price.
Pre-Market Session – Advantages & Risks
Advantages Of Pre-market session
1. Discover Open Price
Despite being closed for trading, the markets are still influenced by news and updates from companies. Companies tend to release quarterly results, M&A news, and other press releases post-market hours. This has an impact on the next trading session and this is visible in the pre-market session.
2. Reduce Volatility
The pre-market session brings down the volatility of the opening prices of stocks. This is mainly due to low volumes during the pre-market session vs. regular market sessions.
Risks Of Pre-Market Session
1. Price Uncertainty
The opening price of the security is uncertain. When the markets open, the pre-market price will move further due to more investors and traders getting into the market.
2. Liquidity Risk
The overall volume in the pre-market session is quite low when compared to regular market hours. This makes order matching difficult as there are fewer active members in the market during this time.
3. Wider Buy-Ask Spread
One of the purposes of pre-market sessions is order matching and price discovery of the stocks. When you combine this with a low trading volume, the spread or difference between the asking price and buy price is wider than usual.
Also Read: How IPO Listing Price Is Decided? – Meaning, Components & More!
The concept of a pre-market session was brought forth in 2010 by the National Stock Exchange (NSE). The purpose was to reduce volatility as soon as the market opens and that meant it was moved by the first price movements of the day.
The pre-open session allows the markets to move at a slightly controlled pace in terms of price discovery and volatility. To early risers, pre-market sessions give the advantage of the first one before the bell, but it also carries a risk to it as well. That’s all for this blog.
We hope it answered your questions regarding the pre-market sessions, including “Can I Buy Shares In Pre Open Session?”. Happy Investing!
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