What Is Overnight Trading In Stock Market: For those of you, who don’t have the time to track the stock exchanges during market hours, overnight trading is a good solution.

It gives you the flexibility to trade in stocks and commodities after market hours before the exchanges open at 9 a.m. Overnight trading is also ideal for those residing outside India and interested in trading back home.

In this article, we are going to discuss what is overnight trading in stock market, overnight trading hours, its benefits, and limitations. 

What Is Overnight Trading In Stock Market?

Buying or selling of equities, derivatives, or commodities anytime after the market is closed until the market reopens the next day, is called overnight trading or after-market order (AMO).

You Can Also Check Out Our Course On the Basics Of Stock Trading For Beginners!

What Are The Overnight Trading Hours?

For equity trading, the overnight trading hours are from 3:45 p.m. to 8:59 a.m. for BSE. The overnight trading hours for NSE are from 3:45 p.m. to 8:57 a.m.

For currency trading, you can place an AMO between 3:45 p.m. and 8:59 a.m. For trading derivatives such as futures and options, the overnight trading hours are between 3:45 p.m. and 9:10 a.m.

Benefits Of Overnight Trading

Some benefits of overnight trading include:

  1. One of the critical benefits of overnight trading is the ease of trading at your own pace, irrespective of market timings. Especially, suppose you are a working professional and do not have the time to follow market trends throughout the day. In that case, overnight trading gives you a chance to trade at your convenience. 
  1. While overnight trading may get you a profit on your stocks the following day, it will also allow you to cut your losses in a losing stock.
  1. You are at liberty to modify or cancel your overnight order, in case you decide not to go through with the order.

Limitations Of Overnight Trading

While overnight trading is convenient, it comes with a few risks. Some limitations of overnight trading include:

  1. Markets suddenly reversed on the next day open because of significant events that transpired the next day. And these events can turn your profits into a loss. 
  1. While AMO allows you to cancel or modify your order, you cannot limit your losses. Stop-loss orders, which help curtail your loss, are not applicable to overnight trading. So, you cannot place an AMO with a stop-loss order.

Example Of Overnight Trading

Let’s assume You have 10 shares of ABC with you. Over the day, you see a positive trend in the prices. Now, you know that your stock’s price will open at a high the next morning and you may want to sell as soon as the markets open.

But you have a meeting at 9 a.m. You can place an AMO to sell your 10 stocks as soon as the markets reopen. This is one of the many scenarios in which you can take part in overnight trading. 

You could also place orders in the Futures and Options segment options using the AMO facilities as this may allow you to benefit from the initial fast movement of this segment after the market opens.

Also Read: 8 Best Books For Intraday Trading – Top Reads For Beginners!

In Closing

In this article, we understood what is overnight trading in stock market, overnight trading hours, and the benefits and limitations of overnight trading.

The process of overnight trading entails risks. So, if you are planning to get in on the leverage that overnight trading provides you, factor in the risks. Use the tool wisely.

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