Most individuals do not know that it is possible to trade in the stock markets before they officially open for business. This is handy information that can be used by traders and investors wanting to make the most of their trades before the rush. A small period of time, known as the “pre-open market” gives traders access to the stock market before the majority of traders start their trading day. Nonetheless, before you venture to trade during this period, there are some things to know about buying and selling stocks during this timeframe.
In 2010, the NSE, or the National Stock Exchange, permitted traders and investors to enter the markets for the purchase and sale of shares before the market opens its doors for a typical trading day. Since then, pre-market trading has taken place. It is a 15-minute window that allows traders to conduct trading in a “pre-open session”. How is this beneficial to traders, if it is beneficial at all? Well, if you want to enter the world of stocks, open a demat account and plan to make big bucks, you should be well-versed with trading practices. You should know that there is a real chance for you to do so in a pre-market session. The advantage of trading in a pre-open session is that price volatility is reduced to some extent, so traders may make the most of trading while other factors have minimal influence on the price of stocks.
You may have a number of questions about the pre-open session. For instance, can you buy as well as sell in these sessions? Is there a limit to what you can buy or sell, or how to buy in the pre-open market? Some investors get very confused about all the nuances of buying and selling stocks directly from the market, as such questions plague them. They may go in for an upcoming IPO to invest in the stock of a company instead. However, as a trader, you can make the most of direct stock trading if you are aware about certain aspects of it.
In pre-open trading sessions, trades take place before regular trading hours. Traders get the advantage of trading at low price volatility before other factors influence stock prices once the regular trading day begins. Traders may have the perk of “open-price discovery” in the pre-open markets.
It is important to note that both the purchase and sale of shares may take place in the pre-open market. The key advantage of this is that certain variables which normally affect the financial markets while trading is on, such as financial news of any kind, do not affect the prices in the pre-open session. Companies typically release news and reports in the hours after the markets open. Therefore, in a pre-open market, the opening price of any stock (in this brief period) is unaffected by any factor that can make it rise or drop sharply.
Furthermore, on a normal trading day, as traders and investors trade and invest more, the stock prices may be affected by the trades themselves. In the pre-open session, this is also avoided. Trading is done with a clean slate as far as the prices of stocks go.
If you want to invest in stocks for the long or short term, you have to open a demat account. Even if you think of an upcoming IPO, and if shares are allotted to you, you still must have a demat account. The pre-open market session may be a good way to try your hand in the live markets if you are just starting out. You may make some substantial gains.