With the recent volatility one may want to purchase stock based on the after hours price as soon as markets open.
I ran a few tests recently and i wasn’t able to achieve the above.
Orders put within a minute of the market opening seems to fail entirely.
Orders put within around 3 minutes of market opening gets stuck on “processing” screen, sometimes it does get “completed” after few minutes but if you close the app the order gets marked as “queued”. You then cannot cancel it for around 15 minutes and it gets marked “completed” in around 15 minutes.
Is this how it is supposed to work? How soon after market-reopening are we supposed to be able to purchase something?
Generally it takes some time for price discovery to occur upon market open. Largely in the UK this function has occurred within the first 15-20 minutes and you shouldn’t really be putting in a market order during this time.
Last thing you want is to deploy all your cash to buy after opening time to see it stuck as “queued” and completed in unspecified amount of time without being able to cancel it. Or app getting stuck entirely.
It’s not a limitation of Freetrade specifically. There is a point to be made about the lack of ‘worked orders’ limiting options but that is a seperate discussion.
Take the NYSE for example, there is an auction process which exists before market open which takes into account the previous close plus all new buy and sell orders and creates an opening price. However, based on this opening price and last minute news, the prices can fluctuate in the first 15 minutes or so as people enter into the market and the opening price can differ markedly from the closing price. In general, it is best to allow the DMMs and others get in and allow for an effective price unless you can execute a ‘worked order’.
The article is unfortunately behind the registration.
Here is a scenario that might help me understand it:
Let’s say the news hit the stock hard on Friday, it dropped from 11 to 9 and after hours price is 8. Some great news came up on the weekend though and the price is expected to bounce back to 11 or 12. Surely everyone will be looking to buy upon market opening and waiting would mean you are loosing money.
What is the best course of action to tackle this opportunity for a value investor on freetrade?
You need to have bought in the pre-market auction which Freetrade does not give you access to. By the time the market opens the price will have jumped up to the highest bid as that is how the price is determined.