How Market Works
The auction process is the fundamental method through which buyers and sellers interact in the financial markets. Here's how it works:
Pre-opening Phase: Before the market officially opens, traders place their orders. However, no trades are executed during this period. Traders can input, modify, or cancel orders.
Price Discovery Process: The exchange uses the orders received during pre-opening to determine the opening price. The aim is to find a price that would cause the greatest number of shares to change hands.
Opening: The market officially opens, and the opening price is established. The trading session begins, and orders are executed at the opening price.
Continuous Trading: It enters the continuous trading phase after the market opens. Buyers and sellers continuously place orders, and trades are executed instantly if matching orders (in terms of price) are found.
Closing Auction: As the market nears closing time, a similar process to the opening occurs. Orders are collected, and a closing price is determined using the same price discovery process.
Post-close: Traders can still place orders for the next day's trading session after the market closes. However, no trades are executed in this period.
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