What is After-Hours Trading?
- Have you ever wondered how trading continues even after the regular market hours end in the Indian stock market? It's called after-hours trading, also known as 'extended-hours trading.'
- It's the practice of buying and selling stocks outside the standard trading hours of the Indian stock market.
- In India, the regular trading hours for stock exchanges like the NSE and the BSE typically run from 9:15 a.m. to 3:30 p.m. (IST). After-hours trading takes place before the market opens and after it closes.
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When Does After-Hours Trading Occur?
The after-hours trading sessions in India are divided into two phases:
Pre-market trading
- This phase occurs before the official market opening at 9:15 a.m. (IST) and usually runs from 9:00 a.m. to 9:15 a.m.
- During this period, traders can place orders, but execution may be delayed until the market officially opens.
Post-market trading
- This phase happens after the regular market closes at 3:30 p.m. (IST). Post-market trading generally continues until 4:00 p.m.
- Similar to pre-market trading, orders can be placed, but execution may occur at a later time.
How Does After-Hours Trading Work?
After-hours trading in the Indian stock market operates through a computerized trading system known as the electronic trading platform (ETP). Here's how it works:
- Access to the ETP: Investors and traders must have access to the ETP to participate in after-hours trading. This access is typically provided by brokerage firms.
- Placing orders: Just like during regular trading hours, investors can place various types of orders during the after-hours sessions, including market orders, limit orders, and stop orders.
- Execution mechanism: Trades during after-hours trading are matched electronically by the exchange. The system pairs buy and sell orders based on price and time priority.
- Price volatility: It's important to note that after-hours trading often sees lower trading volumes compared to regular hours, which leads to increased price volatility. Prices can fluctuate more rapidly due to the limited number of participants.
- Limited stocks: Not all stocks are available for after-hours trading. Typically, only a select number of highly liquid and widely traded stocks are included in the after-hours trading sessions.
Who Can Participate in After-Hours Trading?
- After-hours trading is not accessible to all market participants. It's primarily available to institutional investors, high-net-worth individuals, and traders with access to the ETP through brokerage accounts.
- Retail investors may find it challenging to participate in after-hours trading due to the requirements and risks involved.
- After-hours trading in the Indian stock market offers extended trading opportunities beyond regular market hours.
- However, it's important to be aware of the potential risks, including increased price volatility and limited stock availability.
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