After-Market Orders: What They Are and How They Work
In the stock market, people buy and sell shares between 9:15 AM to 3:30 PM. But what if you are busy at that time? Can you still buy or sell stocks? Yes, you can! You can use something called an After-Market Order.
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What is an After-Market Order?
An After-Market Order (AMO) means you can place your buy or sell request after the market is closed. You can do this after 3:30 PM and before the market opens again the next day.
Let’s say you hear some big news at night and think a stock will go up tomorrow. You can place your order at night using AMO. Your order will be checked when the market opens the next day.
How Does AMO Work?
Here’s how AMO works, step by step:
1. Place the order – You choose the stock and tell your broker to buy or sell after 3:30 PM.
2. Order is waiting – Your order will wait in a queue.
3. Next day – When the market opens, your order is tried. If someone wants to buy/sell at your price, it will happen.
You can choose:
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A Limit Order – You tell the price you want.
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A Market Order – You don’t tell a price. It happens at the best price in the morning.
Features of Using After-Market Orders
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Flexible Timing: After-market orders give you the flexibility to trade even after regular market hours.
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Control Over Price: You can specify the price at which you wish to buy or sell, especially using limit orders.
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Execution Delay: Unlike regular market orders that get executed immediately, after-market orders are executed when the market reopens.
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Liquidity: After-market orders face lower liquidity since fewer participants are involved in after-hours trading.
Types of After-Market Orders
1. Limit Order:
This is an order where you specify the price at which you want to buy or sell the stock. The order will only be executed if the stock reaches the desired price when the market reopens. This is ideal for those who want control over the price they pay.
Example:
You place a buy limit order for Stock X at ₹200. The order will be executed only if Stock X hits ₹200 or below when the market reopens.
2. Market Order:
A market order is an order where you do not specify the price. The order is filled at the best available price when the market opens. While this guarantees execution, it may result in price slippage if the stock price moves significantly.
Example:
You place a buy market order for Stock X. The order will be executed at the best price available when the market reopens.
Benefits of Using After-Market Orders
Risks of Using After-Market Orders
How to Place an After-Market Order?
- Log in to Your Trading Account: Use our platform, Motilal Oswal
- Select the Stock: Choose the stock you want to trade.
- Choose the Order Type: You can select either limit or market order.
- Enter the Price (for Limit Orders): If you are using a limit order, specify the price at which you want to buy or sell.
- Set Quantity: Choose how many shares you want to trade.
- Select AMO (After-Market Order): Choose the option for after-market trading (AMO).
- Place the Order: Confirm and place your order.
Tips for Using After-Market Orders
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Use Limit Orders: Always use a limit order to have control over the price you pay or receive. This helps avoid price slippage.
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Stay Updated: Make sure you are up to date with the latest market news and events before placing after-market orders.
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Start Small: Especially if you’re new to after-market orders, begin with smaller trades to understand how they work.
Comparison with Regular Market Orders
After-market orders are a useful tool for traders who need flexibility and want to react to market news after regular hours. They allow you to place trades in a quieter market, but also come with risks like lower liquidity and price slippage.
By understanding how to use after-market orders effectively, you can manage your trades outside regular market hours and take advantage of new opportunities. But as with any trading tool, it’s important to weigh the pros and cons and use after-market orders wisely based on your investment strategy.