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Guide to Overnight Trading in Stock Market

What is Overnight Trading?

Overnight trading, also known as 'extended-hours trading,' refers to buying or selling stocks beyond the regular trading hours of the Indian stock market.
In India, standard trading hours on exchanges like the NSE and the BSE typically run from 9:15 a.m. to 3:30 p.m. (IST).
Overnight trading takes place before the market opens and after it closes.

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When Does Overnight Trading Occur?

Overnight trading in the Indian stock market can be divided into two key phases:

1. Pre-market trading

This phase happens before the official market opening at 9:15 a.m. (IST) and typically spans from 9:00 a.m. to 9:15 a.m.
During this time, traders can place orders, but execution may be deferred until the market officially opens.

2. Post-market trading

This phase occurs after the regular market closes at 3:30 p.m. (IST) and usually continues until 4:00 p.m.
Similar to pre-market trading, orders can be entered, but execution may occur at a later time.

How Does Overnight Trading Work?

Overnight trading within the Indian stock market operates through the electronic trading platform (ETP), a computerized trading system. Here's a brief overview of how it functions:

Access to the ETP: To participate in overnight trading, investors and traders need access to the ETP, which is generally provided by brokerage firms.
Order placement: Similar to regular trading hours, participants in overnight trading can place various types of orders, including market orders, limit orders, and stop orders.
Execution mechanism: Trades in overnight sessions are electronically matched by the exchange. The system pairs buy and sell orders based on price and time priority, just like in regular trading hours.
Price volatility: Since overnight trading often sees lower trading volumes compared to regular hours, price volatility increases. This is because prices may fluctuate more substantially due to the limited number of participants.
Limited stocks: Not all stocks are available for overnight trading. Typically, only a select number of highly liquid and widely traded stocks are included in the overnight trading sessions.

Who Can Participate in Overnight Trading?

Participation in overnight trading in the Indian stock market is not open to every player.
It's primarily accessible to institutional investors, high-net-worth individuals, and traders with ETP access through brokerage accounts.
Retail investors may find it challenging to engage in overnight trading due to its specific requirements and risks.
Overnight trading in the Indian stock market extends trading opportunities beyond regular market hours.
Investors contemplating overnight trading should carefully assess their strategies and consult with their brokerage firms to ensure they are well-prepared for this unique aspect of stock trading.