I have a question and am not sure I’ve managed to find an answer which explains it to me elsewhere so thought I’d ask.
Scenario: it’s the weekend and the market is closed. I would like to buy let’s say a stock of ABC but it could also just as easily be a currency. The bid/ask price is showing as 100.00/100.00 as it’s out of hours.
What price do I enter on the buy order to go long? Is it 100.00? is it a random number such as 100.10 on the basis that the spread will be somewhere like 99.90/100.10 when the market opens?
And what happens if I do enter 100.10 but for some reason the price jumps from it’s previous close of 100.00 straight through to something like 102.00 when it opens? Does that mean I’ve missed out on the trade? I think this is called gapping but beyond that I don’t know much else.
Sorry but just can’t seem to find the answers to these anywhere.
u can always trade after mkt and pre market sessions
What Is After-Hours Trading?
After-hours trading starts at 4 p.m. U.S. Eastern Time after the major U.S. stock exchanges close. The after-hours trading session can run as late as 8 p.m., though volume typically thins out much earlier in the session. Trading in the after-hours is conducted through electronic communication networks (ECNs).
When you want to set a buy order, whether the market is open or closed, you will be able to specify whether it is a buy stop order or a buy limit order.
A buy stop order must be set above the current price and triggers a purchase when price rises to that level. If price gaps past that level, the purchase is executed at the next available higher price.
A buy limit order must be set below the current price and triggers when price falls to that level. If price gaps past that level, the sale is executed at the next available lower price.
So there is real risk if you set buy orders while the market is closed even if you get the direction right. A buy stop order might be triggered at a price far higher than you really wanted. On the other hand a buy limit order might not be triggered at all.
I’d just be looking to enter as soon as possible at the market open whatever the price may be but by the sounds of it I’d need to set a buy stop higher than the last close price and hope the price doesn’t gap above it.
Its a difficult equation. Bear in mind charts are usually drawn from the bid price, which is the price for selling or shorting the instrument. So it can happen that you think that price went up because your order was executed but when you see the chart, its obvious that the order was hit just by a wider spread, not a “real” price move.
Lot of traders avoid entry at the open as this timing adds a level of unpredictability.
That’s a good point and something I hadn’t really considered so thanks for bringing it up.
I had hoped just to set the order and then go to sleep and forget about it and hope it enters me at a good point but probably on balance I think it is perhaps better to enter manually via a market order so I know exactly what I’m getting into and at what price.
Click on the market watch option on your trading platform. Select after market orders on orders and trades, and select the buy or the sell entry option.
