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What is After Hours Trading

15 Sep 2023

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

  1. 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.
  2. During this period, traders can place orders, but execution may be delayed until the market officially opens.

Post-market trading

  1. This phase happens after the regular market closes at 3:30 p.m. (IST). Post-market trading generally continues until 4:00 p.m.
  2. 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:

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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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