When you are investing in the stock market, it’s important to understand how the market opens and how the prices of stocks are set. One important part of this process is the pre-open session. This session happens before the normal stock market trading begins. Let’s break it down in simple terms so you can understand how it works and why it matters to you as an investor.

What is the Pre-Open Session?

The pre-open session is a short period that happens before the stock market opens at 9:15 AM. It starts at 9:00 AM and lasts until 9:15 AM. During this time, the stock market collects orders from investors but does not start trading yet. The main goal of this session is to figure out the opening price of each stock. It helps the market get ready for normal trading by matching buy and sell orders.

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The Three Phases of the Pre-Open Session

The pre-open session happens in three simple phases:

1. Order Collection Phase (9:00 AM to 9:08 AM)

• What Happens: This is the first phase where investors can place their buy or sell orders. These orders are collected, but no trades are executed yet.

• Why It's Important: It helps gather all the buy and sell orders from investors and traders. During this phase, investors can decide on their buying or selling prices for the stock. This phase doesn’t involve any price movement; it’s just about collecting orders.

2. Order Matching Phase (9:08 AM to 9:12 AM)

• What Happens: During this phase, the stock market begins to match buy and sell orders based on the prices set by investors. The system finds the best prices at which these orders can be matched.

• Why It's Important: This phase is crucial for price discovery — determining the fair opening price of each stock. The market tries to match as many buy and sell orders as possible to set the opening price for each stock.

3. Settlement Phase (9:12 AM to 9:15 AM)

• What happens: Once the orders have been matched, the stock exchange settles the transactions. This is when the opening price for each stock is finalized based on the matched orders. After this phase, the stock market opens for normal trading at 9:15 AM.

• Why It's Important: It ensures that all the orders are settled, and the market is ready for regular trading. The opening price, which was determined during the matching phase, will be used when the market officially opens.

How the Pre-Open Session Works

The pre-open session is very important for price discovery. This simply means finding out the fair value or price of each stock when the market opens. The market does this by matching buy and sell orders. The price at which these orders are matched is called the opening price.

The opening price is decided based on the average price at which the buy and sell orders are matched during the pre-open session. The market uses a call auction system, where all the orders are collected and then matched to find the best price for the opening of the stock.

Stock Opening Price Determined in the Pre-Open Session

Let’s assume there are multiple buy orders for a stock placed during the pre-open session. We will calculate the opening price based on the total number of shares bought at different prices.

When you are investing in the stock market, it’s important to understand how the market opens and how the prices of stocks are set. One important part of this process is the pre-open session. This session happens before the normal stock market trading begins. Let’s break it down in simple terms so you can understand how it works and why it matters to you as an investor.

What is the Pre-Open Session?

The pre-open session is a short period that happens before the stock market opens at 9:15 AM. It starts at 9:00 AM and lasts until 9:15 AM. During this time, the stock market collects orders from investors but does not start trading yet. The main goal of this session is to figure out the opening price of each stock. It helps the market get ready for normal trading by matching buy and sell orders.

Open your Trading Account today!

The Three Phases of the Pre-Open Session

The pre-open session happens in three simple phases:

1. Order Collection Phase (9:00 AM to 9:08 AM)

• What Happens: This is the first phase where investors can place their buy or sell orders. These orders are collected, but no trades are executed yet.

• Why It's Important: It helps gather all the buy and sell orders from investors and traders. During this phase, investors can decide on their buying or selling prices for the stock. This phase doesn’t involve any price movement; it’s just about collecting orders.

2. Order Matching Phase (9:08 AM to 9:12 AM)

• What Happens: During this phase, the stock market begins to match buy and sell orders based on the prices set by investors. The system finds the best prices at which these orders can be matched.

• Why It's Important: This phase is crucial for price discovery — determining the fair opening price of each stock. The market tries to match as many buy and sell orders as possible to set the opening price for each stock.

3. Settlement Phase (9:12 AM to 9:15 AM)

• What happens: Once the orders have been matched, the stock exchange settles the transactions. This is when the opening price for each stock is finalized based on the matched orders. After this phase, the stock market opens for normal trading at 9:15 AM.

• Why It's Important: It ensures that all the orders are settled, and the market is ready for regular trading. The opening price, which was determined during the matching phase, will be used when the market officially opens.

How the Pre-Open Session Works

The pre-open session is very important for price discovery. This simply means finding out the fair value or price of each stock when the market opens. The market does this by matching buy and sell orders. The price at which these orders are matched is called the opening price.

The opening price is decided based on the average price at which the buy and sell orders are matched during the pre-open session. The market uses a call auction system, where all the orders are collected and then matched to find the best price for the opening of the stock.

Stock Opening Price Determined in the Pre-Open Session

Let’s assume there are multiple buy orders for a stock placed during the pre-open session. We will calculate the opening price based on the total number of shares bought at different prices.

Frequently Asked Questions (FAQs) on Pre-Open Session