Everything You Should Know About Pre-Market and Post-Market Sessions
Most of us know that the stock market shuts when the clock shows 3:30 PM IST. Well, like the pre-market (before stock market time), the trading is likely to keep happening slightly post-market time, also known as an after-hours session. You would be surprised to know that both pre-market and post-market trading timings matter a lot for the specific day.
According to NSE, the opening prices of stocks rely on the pre-market time (9:00 AM to 9:15 AM). Similarly, as per global market reports, after-hours trading accounts for around 5-10% of total daily trading as people buy or sell based on global news that happens outside regular hours.
Pre-Market Session
These 15 minutes of morning time are highly crucial for traders, as they can place/update their orders based on the overnight events and news. Once the market starts at 9:15 AM, these orders are matched to the fair pricing of stocks. In simple words, the traders or institutions have a pre-buffer time to think and reach a calm decision with balanced investments.
Regular Market Session
Considered as the main part of the trading day, the regular market session operates from 9:15 AM to 3:30 PM. This is the most usual time for traders or investors to make a decision based on the live market scenarios.
Post-Market (After-Hours) Session
After the regular market shuts down at 3:30 PM, a small post-market session runs between 3:40 PM and 4:00 PM. Investors get the flexibility to place stock orders at the closing prices. In simple words, this post-market session is helpful for making small adjustments to the stock portfolio.
Off-Market Transactions
Off-market transactions can take place even after all sessions are closed. These are typically conducted between Demat accounts through NSDL or CDSL.
Why Do Extended Market Sessions Exist?
Flexibility for the traders is one of the major reasons behind pre-market and post-market trading sessions. It solves the problem of waiting until the next day to take action. The investors have pre-insight to make a more informed decision on the next day’s market openings.
How Extended Trading Works
Extended trading requires the assistance of brokers to make electronic or digital orders. Further, the exchange matches available buy and sell orders for appropriate prices. However, since very few people trade during extended hours, activity is comparatively a lot less than during usual hours. There is an even chance of order delay or quick pricing change.
Who Can Trade During Extended Hours
Trading during the extended hours is for retail investors using online trading apps. These platforms should offer the flexibility to place orders in pre- or post-market access. Those who are likely to invest in mutual funds or finance firms.
What to Do During Extended-Hour Trading
Extended-hour trading is very different from active trading, as you have the flexibility to use time in observing price movements before market opening. The investors can keep an eye on the international trends, news, and market flow.
Risks and Challenges
Extended traders can come across certain challenges, such as lower liquidity (orders not being executed quickly). Additionally, there are chances of higher price volatility causing sudden price changes. Another common challenge is the increasing gap between the buying and selling prices, making it difficult to get the best stock price.
Conclusion
Hence, pre-market and post-market sessions are two key pillars of stock market functioning. With much-needed flexibility for traders, these can be utilized to make your decisions as per the global developments.
All you need to understand what happens before and after the regular trading day to stay prepared for the next session.
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This analysis is for informational purposes only. Please consult a SEBI-registered financial advisor before investing.
– Chandan Pathak
Equity Research Analyst, StockYaari