Market on Close Order: A Comprehensive Guide to Post-Market Trading for 2023

Introduction: Unlocking the Hidden Opportunities in After-Hours Trading

The stock market is a dynamic and ever-evolving ecosystem, with trading hours traditionally limited to the designated market hours. However, in recent years, the advent of electronic trading platforms and extended trading sessions has paved the way for a new frontier in market participation: market on close (MOC) orders.

MOC orders allow traders to execute trades after the traditional market hours, typically between 4:00 PM and 8:00 PM EST. This expanded trading window offers a unique opportunity to take advantage of price movements and market inefficiencies that may occur after the closing bell.

Market on Close Orders: The Mechanics

MOC orders are placed with a broker or electronic trading platform and are executed at the closing price of the underlying security on the day of the order. This closing price is determined by a matching process that balances buy and sell orders at the end of the trading day.

The process of placing an MOC order is similar to placing a regular market order. Traders specify the security they wish to trade, the number of shares, and the type of order (buy or sell). However, it is important to note that MOC orders cannot be modified or canceled once placed.

Benefits of Market on Close Trading

1. Extended Trading Hours: MOC orders allow traders to participate in the market beyond traditional trading hours, providing greater flexibility and convenience.

2. Reduced Volatility: After-hours trading typically experiences lower trading volume, which can lead to reduced volatility and smoother price action.

   

   

3. Increased Trading Opportunities: MOC orders provide an opportunity to capture market inefficiencies that may occur after the close of trading.

4. Execution at Closing Price: MOC orders are executed at the closing price, which ensures traders receive a fair value for their trades.

Market on Close vs. Market Orders: Pros and Cons

Motivations for Using Market on Close Orders

Pain Points:

• Limited trading opportunities during traditional market hours
• Difficulty executing trades at the desired price due to volatility
• Missed opportunities due to end-of-day price movements

Motivations:

• Capture price movements after the closing bell
• Execute trades at a predetermined price
• Adjust portfolio positions without disrupting market activity
• Capitalize on market inefficiencies

Why Market on Close Orders Matter

MOC orders matter for several reasons:

1. Increased Trading Efficiency: MOC orders facilitate efficient price discovery and reduce market volatility.

   

2. Improved Investor Access: MOC orders provide access to the market for investors who may have limited availability during traditional trading hours.

3. Innovation in Trading Mechanisms: MOC orders represent an innovative approach to trading, expanding the capabilities of market participants.

Applications of Market on Close Orders

New Application: Algo-Driven Equilibrium Tracking (ADEQ)

ADEQ is a newly developed trading algorithm that utilizes MOC orders to track and leverage equilibrium prices in the after-hours market. This algorithm identifies price imbalances and executes trades to restore equilibrium, potentially generating profits.

Useful Tables

Table 1: MOC Order Execution Times

Table 2: MOC Order Volume by Exchange

Table 3: Benefits of Market on Close Trading

Table 4: Pain Points of Traditional Market Trading

Conclusion: Embracing the Advantages of MOC Trading

Market on close orders have emerged as a valuable tool for traders and investors alike. By extending trading hours, reducing volatility, and providing access to after-hours market opportunities, MOC orders unlock new possibilities for market participation and profit generation.

As the market continues to evolve, it is likely that MOC orders will play an increasingly significant role in shaping trading strategies and market dynamics. By embracing the advantages of MOC trading, traders can enhance their trading capabilities and achieve greater success in the financial markets.