PRE Open Session in Stock Market (NSE & BSE) Pre Open Market Strategy & Timing

Pre Open Session in India Stock market | Pre Open Market Trading (NSE & BSE) | Pre Open Market Strategy | Pre Open Session timing

Pre Market Trading

As we know from the name itself, pre market trading is the period of trading activity that takes place before the actual stock market trading starts. The pre- open market session starts at 8.00 a.m. and continues till 9.30 a.m. EST.

  • It gives an idea to judge the strength and direction that the trading market may take in the regular trading sessions. Indian stock market trading hours start at 9:15 AM and end at 3:30 PM.
  • Due to the very less number of participants, executing transactions in pre-market trading sessions is quite difficult.
  •  Also, the liquidity, i.e., converting stocks into cash, in this type of pre open market trading is very less as the prices may or may not adjust quickly as they do in regular stock market session.

PRE-MARKET TRADING BACKGROUND

Pre-market trading is operated on a computer-based system including alternative trading systems and electronic communications networks. It has limited liquidity and volume but sometimes it may prove to be very fruitful. Thus traders use this for various reasons like:

  • To anticipate the direction in which the upcoming regular market session and individual securities are headed
  • It provides information that is used to stabilize heavy volatility that may occur due to big announcements, overseas events, and political instability
  • If a big corporation makes any announcement after the closing of the market or before the market opens, that may affect the market, then pre-market traders use this as an opportunity and buy or sells the shares before the regular market session even starts.

What Is Pre Open Market Session?

The pre-open session is for a duration of 15 minutes i.e. from 9:00 am to 9:15 am. The pre-open session is comprised of Order collection period and order matching period. The price band applicable for pre open session is 20%.

  • The pre-open market is an innovation on the exchange side to arrive at the ideal opening price of a stock for the current trading session.
  • The pre-open market sessions timings are from 9.00 A.M. to 9.15 A.M., 15 minutes before the regular trading session starts for both the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE).
  • It is done basically to discover the right price of the stock.

Check Pre Open Market Data from NSE here
https://www.nseindia.com/market-data/pre-open-market-cm-and-emerge-market

Stock Market Timings

Trading on the equities segment takes place on all days of the week (except Saturdays and Sundays and holidays declared by the Exchange in advance). The market timings of the equities segment are:

A) Pre-open session
Order entry & modification Open: 09:00 hrs
Order entry & modification Close: 09:08 hrs*
*with random closure in last one minute. Pre-open order matching starts immediately after close of pre-open order entry.

B) Regular trading session
Normal / Limited Physical Market Open: 09:15 hrs
Normal / Limited Physical Market Close: 15:30 hrs

Block Deal Session Timings:
Morning Block Deal Window: This window shall operate between 08:45 AM to 09:00 AM.
Afternoon Block Deal Window: This window shall operate between 02:05 PM to 2:20 PM.

C) The Closing Session is held between 15.40 hrs and 16.00 hrs

Read more:- Indian Stock Market Holidays & Timing

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How Premarket Trading Works?

  • Pre-market trading is done through Electronic Communication networks (ECNs).
  • When a buy order is placed at a pre-arranged rate, ECNs keep a track, and, by the time it matches a sell order, it acts as a matchmaker brings them close completely making the broker null and void.
  • In premarket trading sessions, the liquidity levels are quite tight and the trade is rather volatile.

Before preceding further, let us learn a few types of orders that are placed in the market:

  • Market order: It is a request made by the investor through a broker or brokerage service to buy or sell a particular share at the best profitable prices available when the prices are not fixed.
  • Limit order: It is a type of order to buy or sell a share at a specified price and quantity. These are executed once the matching orders are found.

Equilibrium Price determination:

In a call auction price mechanism, equilibrium price is determined as shown below. Assume that NSE received bids for particular stock xyz at different prices in between 9:00 am and 9:15 am.

Based on the principle of demand supply mechanism, exchange will arrive at the equilibrium price – the price at which the maximum number of shares can be bought / sold.

In below example, the opening price will be 105 where maximum 27,500 shares can be traded.

SHARE PRICE(`) ORDER BOOK DEMAND / SUPPLY SCHEDULE MAXIMUM TRADABLE QUANTITY
BUY SELL DEMAND SUPPLY
103 13500 11500 50500 11500 11500
104 9500 9800 37000 21300 21300
105 12000 15000 27500 36300 27500
106 6500 12000 15500 48300 15500
107 5000 12500 9000 60800 9000
108 4000 8500 4000 69300 4000

BREAK-UP OF THE PRE-MARKET OPEN SESSION:

The pre market open session is of 15 minutes in total, and is broken into three sub-sessions further:

1.ORDER ENTRY SESSION:

From 9.00 a.m. to 9.08 a.m. (8 minutes):

In this session :

  • Placing of orders to buy or sell stocks is undertaken.
  •  In this session, we can modify or cancel orders
  • After 8 minutes, no orders are taken on.
  1. ORDER MATCHING SESSION:

From 9.08 a.m. to 9.12 a.m. (4 minutes):

In this session :

  • Order confirmation and order matching
  • Calculating the opening price of stocks for the normal session

During this time, you cannot buy, sell, cancel, or modify your order.

  1. Buffer Session

From 9:12 AM to 9:15 AM (3 Minutes)

The task undertaken in this sub-session is:

  • Buffer Session
  • Facilitates the transition from pre-open to regular market session

This sub-session is used as a buffer for any abnormalities in the previous two sub-sessions.

Special Pre-Open session

The special pre-open session is applicable to the below type of securities:

  • IPOs securities – first day of trading. This also includes SME IPOs
  • Re-listed Securities first day of recommencement of trading. (as defined under para 1(C) of SEBI circular no. SEBI/Cir/ISD/1/2010 dated September 2, 2010)
  • Stocks having derivatives contracts on the Ex-date of trading after undergoing corporate restructuring*

*Corporate Restructuring: Merger, demerger. Amalgamation, capital reduction/consolidation, scheme of arrangement, in terms of the Companies Act and/or as sanctioned by the Courts, in cases of rehabilitation packages approved by the Board of Industrial and Financial Reconstruction under Sick Industrial Companies Act and in cases of Corporate Debt Restructuring (CDR) packages by the CDR Cell of RBI.

The below are the timings for special pre-open session:

PRE-OPEN2 SESSION TIME REMARK
Order Entry Period 9:00 am – 9:45 am (*)
  • Order entry, Modification and Cancellation
  • (*)    System    driven    Random    closure between 44th and 45th minute
Order Matching & trade Confirmation Period 9:45 am(*) – 9:55 am
  • (*) Order matching period will start immediately after completion of order collection period.
  • Opening price determination.
  • Order matching and trade confirmation.
Buffer Period 9:55 am – 10:00 am
  • Transition   from    pre -open    to Normal market

At present, only NIFTY 50 and SENSEX 30 stocks at NSE and BSE respectively, have been enabled for trading in the Pre-open market session by the exchanges.

Stocks which will get excluded or included in the NIFTY or SENSEX indices will still be a part of the pre-open market session.

Happy Investing!

PRE Open Market Session FAQs

Who Can Trade in a Pre-Open Market Session?

Everyone can trade in pre open session of stock market.

How do I place an order in pre open session?

During the premarket session for the first 8 minutes (between 9:00 AM and 9:08 AM) orders are collected, modified, or cancelled. You can place limit orders/market orders. The order collection window can close at any time between 9:07 AM and 9:08 AM.

What time does pre market open?

The pre-open session is for a duration of 15 minutes i.e. from 9:00 am to 9:15 am. The pre-open session is comprised of Order collection period and order matching period. The price band applicable for pre open session is 20%.

Can I buy stock before the market opens?

Yes you can. Place a MIS order between 9AM to 9:08AM to buy or sell during the premarket session. NSE and BSE — has introduced the 15-minute special pre-open trading session, a mechanism under which investors can bid for stocks before the market opens.

What happens in pre opening session?

In a situation where no equilibrium price is discovered in the preopen session, all market orders are moved to normal market at previous day’s close price or adjusted close price / base price following price time priority.

Is pre market a good indicator?

Pre market price doesn’t guarantee that the same momentum in stock or index will continue… Pre opening market session helps traders to know at which price stocks are going to open. But it doesn’t shows the direction of market and how it is going to trade for rest of the day. It is not an indicator.

How does pre market work?

Premarket trading is the trading session that happens before the normal trading session starts. The session allows both institutional investors and individual traders to trade stocks between 9:00 am to 9:15 am.

Is it possible to buy stocks in pre market in India?

Yes, you can buy stocks in pre market window.

How to place orders in pre-open session?

During the pre-market session for the first 8 minutes (between 9:00 AM and 9:08 AM) orders are collected, modified, or cancelled. You can place limit orders/market orders. The order collection window can close at any time between 9:07 AM and 9:08 AM. 

Is it possible to place a pre-market order in the future in NSE?

Not possible. It was possible through GTC (Good till cancelled ) orders prior to 2004.

Where can I find the pre-open data of the NSE for the last year?

You can find it on nse website here. https://www.nseindia.com/market-data/pre-open-market-cm-and-emerge-market

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