The next strategy that we will learn is Pre-Open Market Strategy.
What is Pre open Market?
The pre-open market is the market window which is before the normal market timings. The duration of the pre-open market session is from 9:00 AM to 9:15 AM, i.e, 15 minutes before the trading session starts and is conducted on both the major Indian stock exchanges: NSE and BSE. It helps in stabilizing heavy volatility due to some major event or announcement that comes overnight before the market actually opens for trading.
Order Entry Session: From 9:00 AM to 9:08 AM (8 Minutes)
This session enables you to place an order to buy and sell stocks. Modify or cancel orders can be made. After these initial 8 minutes, no orders are accepted.
Order Matching Session: From 9:08 AM to 9:12 AM (4 Minutes)
This 4 minutes, the exchange takes for Order confirmation and order matching.
Calculating the opening price of stocks for the normal session is done during this session.During this time, one cannot buy, sell, cancel, or modify orders.
Buffer Session: From 9:12 AM to 9:15 AM (3 Minutes)
This is known as the Buffer Session. It facilitates the transition from pre-open to regular market session.
What is this strategy?
The pre-market open strategy is a strategy in which we identify stocks which have significant up or down moves during the pre-market opening session.
Stocks which have significant up or down moves, i.e., more than 1% during the pre-market opening session are filtered out for trading purposes during the normal trading session. It is assumed that the stocks which move more than 1% in either direction, will generally show momentum and trade positions can be initiated.
How to identify stocks using this strategy?
There are some screeners which we should use to identify stocks in the pre-market opening session:
- Choose stock from the F&O list. This is because mostly stocks listed on the derivative segment tend to be more volatile as outstanding positions are there, hence the chances of these stocks to be in momentum is higher.
- Volume traded should be at least 10,000in the pre-market session.
- The price range of stocks that could be selected should be between ₹100 - ₹2000. Avoid stocks whose price is lower than ₹100 or higher than ₹2000.
- VIX should be above 20.
Once we get a stock list based on the above three criteria then on market opening the first 15 minute price action needs to be closely monitored. First 15 min Price range should be more than 1.3% of Avg instrument price (average is calculated by taking the high and low prices of the 1st 15 minute candle and divide it by 2)
Trade Initiation
If all the criteria are met, buy the stock when price crosses the high of the 1st 15 minute candle. An order, 5 paise above the high price, 1% stop loss and 1% targetcan be entered into the system after 9.30AM.
Similarly sell 5 paisa below the first 15 minutes candle low with 1% target & 1% stop loss.
No fresh trade is to be taken after 2 pm.
Trades which neither hit stop loss or target should be squared off at 3.10 p.m.
This is a very simple intraday trading strategy based on algorithms. Once all the criteria is met, the trader can simply put basket orders for all stocks in the list.
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FAQs
Pre open market strategy is provided to stabilise heavy volatility due to some major event or announcement that comes overnight before the market actually opens for trading.
Is it better to buy pre-market or at open? ›
Pre-market trading can be a good way to get into the market or out of it, particularly for widely followed stocks and funds. With pre-market trading, you can place trades before much of the market is ready to act. Despite this advantage, pre-market trading is not without some drawbacks.
How to buy options before the market opens? ›
Pre-market Orders:
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. After 9.08 AM to 9.15 AM no new orders can be placed, orders placed are matched and trades confirmed.
How do you predict market before opening? ›
After-hours trading commonly helps indicate the next day's open. Extended-hours trading in stocks takes place on electronic markets known as ECNs before the financial markets open for the day, as well as after they close. This activity can help investors predict the open market direction.
What are the benefits of pre open market? ›
Pre-Market Trading: Benefits
Provides an opportunity to react early to overnight news: Pre-market trading provides the retail investor with an opportunity to react to overnight news before the regular trading session commences.
What is the pre-market trading strategy? ›
A key component of a successful premarket trading strategy is the identification of premarket highs and lows. Even though volume is light in the premarket, these key price points will act as price magnets in the regular session.
What brokers allow 4am trading? ›
Webull: Webull offers full extended hours – 4 am to 9:30 am and from 4 pm to 8 pm. Tastytrade: Tastytrade offers extended hours from 8 am to 9:30 am and from 4 pm to 8 pm. Ally Invest: Ally Invest offers extended hours from 8 am to 9:30 am and from 4 pm to 5 pm.
Is pre-market a good indicator? ›
The pre-market, while often a decent indicator, is not a solid indicator of regular market movement. Thus traders should always be careful when trading the pre-market. Due to its inherent limitations, pre-market trading presents both opportunities and risks.
How long does it take for premarket to open? ›
Pre-Market Hours
Though its trading session typically occurs from 8 a.m. to 9:30 a.m. ET each trading day, several direct-access brokers allow access to pre-market trading to commence as early as 4 a.m. However, very little activity occurs for most stocks so early in the morning unless there is news.
What is the 3 30 formula in trading? ›
The 3-30 rule in the stock market suggests that a stock's price tends to move in cycles, with the first 3 days after a major event often showing the most significant price change. Then, there's usually a period of around 30 days where the stock's price stabilizes or corrects before potentially starting a new cycle.
Thus, to place a pre-market order, you will need to contact your broker. Your broker will be able to help you place the order and explain the risks involved. Thus, while placing limit and market orders amidst normal trading hours, one can only take limit orders in use.
Who trades in pre-market? ›
In case you wish to know who can benefit from trading in this tiny window that opens before a regular session of trading begins, the answer is that anyone can.
Who is the most accurate stock predictor? ›
1. AltIndex – Overall Most Accurate Stock Predictor with Claimed 72% Win Rate. From our research, AltIndex is the most accurate stock predictor to consider today. Unlike other predictor services, AltIndex doesn't rely on manual research or analysis.
Which stock will boom in 2024? ›
Top Long Term Stocks to Buy in 2024 Based on 5Y Avg Net Profit Margin
| Name | Sub-Sector | Close Price (Rs.) |
|---|
| Central Depository Services (India) Ltd | Stock Exchanges & Ratings | 2,387.00 |
| Aptus Value Housing Finance India Ltd | Home Financing | 337.00 |
| SJVN Ltd | Renewable Energy | 131.00 |
| Sun Tv Network Ltd | TV Channels & Broadcasters | 783.90 |
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There are some screeners which we should use to identify stocks in the pre-market opening session:
- Choose stock from the F&O list. ...
- Volume traded should be at least 10,000 in the pre-market session.
- The price range of stocks that could be selected should be between ₹100 - ₹2000. ...
- VIX should be above 20.
Pre-open market session: Pre-open session was introduced to minimise the volatility and to discover the opening prices of securities during the market opening every day and is only allowed for the equity segment. It is conducted between 9:00 AM to 9:15 AM on NSE and BSE.
What is the concept of open strategy? ›
Open Strategy is about actively involving people outside top management in the strategy process. This can include front-line staff and other management who are outside the top exec team. It should also include people outside the organisation's 'four walls' including - customers, partners and suppliers.
What is the meaning of pre opening? ›
: occurring before something (such as a store) opens for business. a preopening staff meeting.
What is the pre emptive move strategy? ›
A preemptive move will be defined as a major move by a focal business ahead of moves by its adversaries, which allows it to secure an advantageous position from which it is difficult to dislodge because of the advantages it has captured by being the first mover.
