After Market Orders (AMO) – Definition, Working and Types

Most new traders assume that the set market hours are the only available space for them to trade or place their orders. However, this is not entirely true. After the trading session, you can also place your orders to take advantage of the evolving market conditions and stay on top of your game. So how does this work, and what is the benefit of After Market Orders? Here is all you need to know about After Market Orders and how they can benefit traders. 

What is an After Market Order (AMO)?

An After Market Order (AMO) is a type of order that allows traders to place buy or sell requests for stocks outside of regular trading hours which is between 9.15 am to 3.30 pm. AMOs (After Market orders) can be placed anytime after the market closes and before it opens for the next trading session. 

These orders are queued for execution upon the start of the trading session on the subsequent day at the opening bell. These orders are particularly useful for traders who may have limited time to trade during the active trading sessions or who closely track international market movements to take advantage of the latest news, earnings reports or any other factors that can influence stock prices.

How Does an After Market Order work?

Now that we know the meaning of After Market Orders (AMO), let us understand how it works. The process for placing an After Market Order (AMO) is explained here. 

• Traders can place AMOs after regular market hours, typically from 3:45 p.m. to 8:59 a.m. on trading days or during weekends and holidays when the market is closed. These orders can be modified or cancelled before execution at the start of the regular market hours during the following trading session. 

The after-market order timings on the stock exchanges are,

• Traders can place buy and sell orders as AMOs, which are queued and stored with the broker or exchange system until the market opens for the next trading session.

• These orders are executed based on the opening price of securities in the next trading session. 

• To place the order, traders need to log into their trading account and select the stock, the order types (market order, limit order, etc.), and other details like the quantity and price. 

• AMO orders are matched with market orders when regular trading hours begin and are executed at the best available price, which may differ from the specified price due to market conditions.

• After the order is executed, traders receive an email confirmation from their broker with essential details like the execution price, quantity, and any applicable charges for the order.

Types of After Market Orders (AMO)

Understanding the different types of after-market orders and how they are executed is essential for optimum execution. Here is a brief explanation of each of the type of after-market orders. 

Features of After Market Orders

A few prominent features of After-market orders include,

• The convenience to place buy or sell orders outside regular trading hours, typically from 3:45 PM to 8:59 AM the next trading day.

• Ability to plan trades ahead of market opening based on overnight developments or anticipated market movements.

• Availability of AMOs across different market segments like equity, derivatives, and currency segments.

• Flexibility to modify or cancel AMOs until the start of the pre-market session, allowing for adjustments based on late-breaking news or changing market conditions.

• Effective in implementing efficient risk management techniques by entering trades at desired prices before market hours begin.

Limitations of an After Market Order

After-market orders allow traders to exploit evolving markets and profit from market changes. However, they can also be risky and lead to potential losses if executed without a thorough understanding. Here are a few limitations to using after-market orders that traders need to be aware of.

• The price at which the AMOs are executed may differ significantly from the closing price due to changes in the after-market hours, which can result in unexpected trades like lower profits or potential losses.

• Traders may be faced with wider bid-ask spreads due to lower liquidity during the after-market hours, which can potentially impact the price and speed at which the orders are executed.

• Some brokers may have restrictions or limitations on the types of securities or orders that can be executed under the realm of AMOs, which can restrict traders' flexibility or access to target securities. 

Regular Market Orders vs After Market Orders

After considering all the details of after-market orders, let us focus on the key differences between after market orders and regular orders. 

Conclusion

After-market orders are an efficient tool for traders to take advantage of changes in market sentiment or events during after-market hours. However, due to higher volatility, they pose an enhanced risk for traders. Therefore, it is important for traders to understand the nuances of after-market orders before using them successfully.