What is Pre-Open Market Session in Stock
Market and How It Functions?
The
Indian Stock Exchange beings at 9 am and close at 3 pm. If you are a beginner
in the stock market or you want to learn how a stock market functions, the
first thing you must know is its timing. The Indian stock market opens at 9 am
but the actual opening happens at 9.15 am. So the question that would arise in
anyone’s head would be what happens between 9 am to 9.15 am. This 15-minute
session is known as a pre-open session. It applies to both NSE and BSE.
What is the pre-open market?
The
pre-open market session begins at 9 am and ends at 9.15 am. The concept of
pre-open was introduced to reduce volatility in the stock market. In this
session, the first 8 minutes i.e. from 9 am to 9.08 am orders from traders and
investors are collected, modified, or cancelled. In this time slot, you can
place your limit or market orders. This order window shuts between 9.07 am to
9.08 am.
This
special window helps in reducing volatility due to events like mergers,
acquisitions, or any other news in the stock.
How Pre-Open Market Session Reduces Volatility
in Share Market?
The
pre-market or pre-pen session helps in stabilizing the market session by determining
the actual demand and supply of stocks. With the help of demand and supply, the
equilibrium in the stock price is decided. This mechanism stabilizes the price
of a stock and reduces the feeling of panic or fear among the investors.
Break-Up of Pre-Open Market Session
The break-up
of the first 15 minutes is as follows;
· The first 8 minutes i.e. from 9 am to 9.08 am
is for placing buy and sell orders. In this session, you can even modify or
cancel the order. After the first initial 8 minutes, no further orders are accepted.
· The next 4 minutes i.e. from 9.08 am to 9.12 am
is for order matching and order confirmation. No buy, sell, modification or
cancellation orders can be placed during this period. In this period the
opening price of the stock is determined for the normal session.
· The next 3 minutes i.e. from 9.12 am to 9.15 am
is for the buffer session. This period is for the transition from the pre-open
market to a regular market session. The buffer period is used to overcome any
abnormalities in the previous two phases of the pre-opening session.
In the
pre-opening session of the market, anyone can trade and place orders. Since you
are now aware of the pre-market session, you may even try placing an order
during that period. If you are a beginner in the market and you may consider
opening a demat account with Indira Securities. We offer a wide range of
broking services at the most affordable rates.