What Is the Opening Bell?
The opening bell is rung on the trading floor to signify the start of the day’s trading session. Since 1985, the New York Stock Exchange (NYSE) has used the opening bell to start its trading session at 9:30 a.m. Eastern Time. Opening bells ensure order in a marketplace by ensuring that no trades occur before the opening or after the close.
Understanding the Opening Bell
Physical trading floors have become less common over the years with the rise of electronic trading. Most traders use the term opening bell to describe the opening of a given market. The physical ringing of the opening bell has become a ceremonious event where dignitaries visiting the stock markets or companies that are trading for the first day are given the honor of ringing the bell.
The first bell was a Chinese gong. However, in 1903, the gong was replaced by an electronically operated brass bell. The bell is accompanied by the gavel that is used in conjunction with the closing bell in recognition of 19th-century stock calls. The opening and closing bell can be viewed each day on the The New York Stock Exchange’s website.
Before the Opening Bell
Many exchanges offer pre-market trading that occurs before the opening bell. During this time, traders and investors may place trades based on news that is released overnight or before the opening bell and the start of the trading session.
While pre-market trading has its advantages, there are several important risk factors. Pre-market trading tends to have less liquidity than trading during regular hours, which means that bid-ask spreads may be wider and price action may be significantly more volatile. Many pre-market and after-hours traders are also institutional investors trading in mutual funds and hedge funds, which means that retail investors must compete with professionals.
Opening Bell Times
The New York Stock Exchange opens at 9:30 a.m. Eastern Time and closes at 4:00 p.m. Eastern Time, but different exchanges open at different times of the day. For example, many futures markets have an opening bell followed by a morning and afternoon session. The options markets also tend to have different opening bells depending on the exchange. Traders should be aware of these times before trading in the market.
In the foreign exchange (forex) market, there is no opening bell since the market operates 24-hours a day, six days per week. The start of the trading day, however, is often considered to be 5:00 p.m. Eastern Time until the same time the next day.