How To Trade In Pre Open Session
Our Indian stock markets allow orders to be placed from Monday to Friday. An order can be a buy order or a sell order.
Any number of sequences that can be placed using your broker provided the software. The stock interchange starts accepting orders from 9 AM.
The time between 9:07 AM to 9:15 AM is the cooling period and new orders cannot be placed at this time.
Of course, a certain type of orders called After Market Orders can be placed. I will explain this later.
During the 9:07 AM to 9:15 AM, some transactions might get completed during this time. for a given buy, there is a corresponding sell at the same price.
The actual stock market opens at 9:15 AM after which everyone is free to put buy and sell orders. Our stock markets close at 3:30 PM. Remember, I told you about traders? We have a special type of traders called Intraday traders.
First Adviser is the Best SEBI Registered Stock Advisory Company in India.
Trade In Pre Open Session
Trading = buying and selling (or vice versa) of shares with an intention of not taking delivery.
These Intraday traders take Intraday positions. They buy a share in the morning and anytime before the market closing, they sell the share.
A professional trader might do this buying and selling of shares several times within a day. But they will close their positions by the end of the day.
So, their net position at the end of the day will be they do not take any delivery of the shares. Intraday positions must be closed by 3:20 Noon.
The closing time of the trading is generally determined by the stockbroker. Pre-market orders can be placed with a bit price only?
Every share will have a price band called circuit limit. It is the price range between which the share is move during the day.
So, during the pre-order session, you can place an er for any price within that price band. Now look at this scenario and tell me what happens.
If a trader buys shares at Rs. 1000 and the stock price came down to Rs. 800 at around 3:20 PM, will the trader be in profit or loss? Yes. This is clearly a loss. Loss of Rs. 1000 – Rs. 800 = Rs. 200 per share.
Pre Open Market Strategy
Now, assume I bought 100 such shares. How much will my loss be? My loss will be : 100 shares x Rs 200 per share = Rs 20,000.
And because I am a trader, I have to accept the loss by market closing time. If I do not close the positions, the broker automatically closes the position. So, for traders, profits or losses will be determined by the end of the day.
Traders make a profit if they buy the share and if the share price went up from the price they bought.
Traders make a loss: if they buy the share and if the share price goes down away from the price at which they bought.
This sounds simple but in real life trading, this is a very difficult thing. Understood about trading? But I told you, our role will be investing because we are investors.
Unlike traders, investors need not have to worry about timings. They can relax, observe the market moment and place orders at a price that they feel is appropriate.
Benefits Of Trading In This Session
When an investor buys a share, he has to put his cash into the trading account. CNC = Cash, And Carry. This means, you buy with cash and carry the shares.
The shares that you bought today will come to your demat in 2 working days. T = transaction day Between 9:15 to 3:30 PM, investors can watch the market and buy or sell their shares.
There should be buyers or sellers to square off right… What if there are no buyers and sellers?
For traders, if there are no buyers or sellers, the broker will do an auction of the shares in the following few days. This is an expensive task and invites the guilty.
However, this happens in thinly traded shares where there will be little or no volumes.
Shares of companies that will not trades well on stock exchanges are of high risk for both investors and traders. Always avoid such companies.
In fact, I have seen shares moving 10% lower or higher in pre-opening. So if somebody punches order at a lower price will it executes?
The price at which most of the orders match on the side and sell side will determine the opening price. However, if our order is at that price or above, the order will executable.
Now, we saw that during the pre-opening session, the opening price of the share will be determined.