The Pre-Open Market Session in the stock market is a special time before the normal market hours start. It's usually for 15 minutes, from 9:00 AM to 9:15 AM. This session is important because it helps find out the opening prices of stocks and controls big changes in prices. During this time, people can say if they want to buy or sell stocks, but the actual buying and selling don't happen yet. The prices at the end of this session decide the starting prices for the regular market. This session is very useful, especially if there's big news or something important happened after the market closed last time.
The opening price of a stock in the Pre-Open Market Session is determined through a process that matches demand and supply to find a balanced price. Let's understand this with an example:
Imagine a stock, XYZ Ltd., which closed at ₹100 the previous day. The next day, in the Pre-Open Market Session, various buy and sell orders are placed at different prices.
Example:
| Oder Type | Price (₹) | Quantity |
| Buy | 102 | 500 |
| Buy | 101 | 300 |
| Sell | 99 | 200 |
| Sell | 98 | 400 |
In this example, the system will try to find a price where the maximum number of buy and sell orders can be matched.
- Only 500 shares can be traded at 102 (500 purchase orders at 102, but no sell orders).
- Only 500 shares can be exchanged at 101 (800 purchase orders at 101 and above, but 500 sell orders at 101 and below).
- At 100, you can trade 800 shares (800 purchase orders at 100 and above, and 600 sell orders at 100 and below).
- 1000 shares can be traded at 99 (1100 purchase orders at 99 and above and 1000 sell orders at 99 and below).
So, the opening price would likely be set at ₹99, where the maximum number of shares (1000) can be traded. This process ensures a fair and balanced opening price based on actual market demand and supply.
What are the rules for Investors to Invest in a Pre-Open Market Session in Stock Market?
Investors must observe specific regulations while investing in the stock market's pre-open trading session:
Time Frame: The session lasts 15 minutes, usually between 9:00 and 9:15 a.m. It is broken into three sections:
- Order Entry Period (9:00 AM - 9:08 AM): During this time, investors can place, modify, or cancel their orders.
- Order Matching Period (9:08 AM - 9:12 AM): In this phase, orders are matched and the opening price of stocks is determined.
- Buffer Period (9:12 AM - 9:15 AM): This is a transition phase to the regular market session.
Order Types: Only limit orders and market orders are allowed during the Pre-Open Market Session. No special orders like stop loss or bracket orders are permitted.
Price Bands: There are price bands in place to prevent extreme volatility. Orders placed outside these bands are not accepted.
Modification and Cancellation: During the Order Entry Period, investors can alter or cancel their orders, but not during the Order Matching Period.
No Guarantee of Execution: Placing an order during this session does not ensure execution since it is contingent on the availability of a matching order.
Finalization of Opening Price: At the completion of the Order Matching Period, the opening price is confirmed and utilized as the starting price for the regular market session.
Pros and Cons of Pre-Open Market Session in the Stock Market
| Pros | Cons |
| Price Discovery: Helps in determining the opening price of stocks, providing a more balanced and fair start to the trading day. | Limited Time: The session is only 15 minutes long, which can be a constraint for making thoughtful investment decisions. |
| Reduces Volatility: Absorbs the impact of major news or events that occurred after market hours, reducing sudden spikes or drops at market opening. | No Guarantee of Execution: Orders placed during this session may not always be executed, as it depends on matching orders. |
| Opportunity for Early Investors: Allows investors to react to overnight news or global market trends before the regular session begins. | Complex for Beginners: The mechanism of the Pre-Open Market Session can be complex for new investors to understand. |
| Price Bands: These bands prevent extreme volatility by not accepting orders outside the set price range. | Limited Order Types: Only limit and market orders are allowed, restricting strategies that involve other types of orders. |
| Transparency: Offers transparency in price-setting, as the opening price is determined based on actual buy and sell orders. | Buffer Period Constraints: The buffer period does not allow order modification or cancellation, which can be limiting. |
What is the stock market opening time?
It's especially useful for those who want to react quickly to news or events that happened overnight or in global markets.
Can all types of orders be placed?
No, only limit orders and market orders can be placed. Special orders like stop loss aren't allowed in this session.
Does placing an order in this session guarantee a trade?
No, placing an order doesn't always mean it will be traded. It depends on if there's a matching order from someone else.
What happens after this session?
The regular stock market session starts at 9:15 AM, using the prices set in the Pre-Open Market Session as the starting prices for the day.
Is this session important for all investors?
It's especially useful for those who want to react quickly to news or events that happened overnight or in global markets.