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Guide to Overnight Trading in Stock Market

23 Sep 2023

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.


Related Articles: How to Open a Demat Account Without a Broker | Factors to Keep in Mind While Opening a Demat account | Factors to Consider When Opening a Demat Account 


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