Gap up/gap down how does it work ?

Hi everyone,
i am new to the markets and have a question
pardon me if this question seems dumb
i have never traded the indian market my only experience is forex demo account which i have done by technical analysis


My question is can u place an order after the market is closed.?
lets say,i think the markets are going to open positively,can i place an order lets say at 8AM ?? to take advantage of the gap up in the market ?
or can i place an order in the pre-market open from 9.00-9.07/.08 am ?

i trying to google and read its advisable to place limit orders ?
can we place oders in F&O segment or only equities or neither?


can anyone give illustrate on this matter

as you can see my knowledge is very less in this matter
any information will be hugely appreciated

no one knows the answer?

Gap up and Gap down happen due to any news affecting the stock like finanacial results release after market hours.As I believe Pre-open and after hours trading are not avaialable to public. That is the reason why the price gaps. I am guessing that the Stock futures would also affect the opening, but I do not know for sure.

Shepherd

so it's open for private firms..?? they can trade before opening of market.....??

Frankly, I have to acknowledge my knowledge is limited. I could Google about pre-open where it seems for first seven minutes from 0900 hrs, orders are collected and at 0908 or 0909 hrs, trading is halted and then price equilibrium is established.

Shepherd

It is possible to place orders before the market opens but it will be traded only after 9.15 am. If the price strikes your price only then it will be traded otherwise your order will remain pending untill the price retraces to your level.

sometimes nifty opens gap up or gap down ...say closed @ 5300.. next day gap up of 100 points opens @ 5400...wat is the mechanism ...how it happens....I mean in intraday ...people buy shares thats why index rises...but overnight...?

i think sg/smart trade will be in a position to answer this question to you

hi

gaps occur when new information, which is not already accounted for by the mkt participants,comes in after the mkt closes.

there is no way possible that u can trade the mkts after close or before open to take advantage of these gaps.

regards

TraderRavi said:

sometimes nifty opens gap up or gap down ...say closed @ 5300.. next day gap up of 100 points opens @ 5400...wat is the mechanism ...how it happens....I mean in intraday ...people buy shares thats why index rises...but overnight...?

Click to expand...

Dear Ravi

why do gaps occur...our mkts do not function standalone..they are linked to the other global mkts.they are sensitive to both internal & external news events.

let us take a hypothetical eg.

u are long nifty @ 5000 and nifty closes @ 5020.. u are sitting pretty on a 20 Rs. profit at close and u leave ur trade open to get sum more profit fr the next day...
in the evening, a few European banks fail the 'stress test'... England, France & Germany all go down, so does US..the sentiment everywhere is bad.
It carries over to Japan in the morning and then Hong Kong.
when u see Hang Seng trading 500 points lower in the morning, u know that our mkts are likely to open lower..
though u did not sell off ur nifty @ 5020 y'day, u are ready to sell @ 5000 2 day, thinking that it wd be a breakeven trade.
But, many others are thinking in the same manner, and there are others who want to take advantage of the situation and go short,in order to make a quick buck becos they know that many longs wd be trapped frm y'day and wd want to get out..
the cumulative effect is that every one wants to sell nifty in the morning..
bang.. nifty opens @ 4960.. 60 point gap down.
another case could be where a company which has a decent weight in Nifty announces its results after the close or before open next day.
or a major political move or turmoil..
terrorist attack...
the list is endless..hence we see so many gap ups and downs..
it all depends upon the sentiment..

regards