premarket trading

What is Premarket Trading?

As the name suggests, the premarket trading session starts before the regular market period. That’s when investors and traders evaluate the possible direction regular trading will take.

Pre-market trading activity happens in stock markets. These are open during the day. Hence, it’s not something to expect in foreign exchange markets as these operate around the clock.

So, when is premarket trading likely to start? It starts as early as 4 a.m.

How does pre-market trading work?

Pre-market trading occurs on electronic markets. These include the electronic communication network (ECN) and alternative trading systems (ATS).

Here’s what you can do that early.

  • Open your account during premarket trading hours
  • Analyze price changes
  • Follow the latest news and reports
  • Find stock
  • Execute the order during regular market hours

Benefits of Premarket Trading

  • Premarket stock trading lets you place your orders before the day’s schedule.
  • You have time to analyze and read reports.
  • It’s convenient for investors with full-time jobs elsewhere.
  • Allows traders to react to news and reports before regular market sessions.
  • The high risk reduces participants, which increases the competitive edge.

What securities can be traded in the premarket session?

The pre-market trading activity focuses on some securities. These are stocks traded on Nasdaq and the New York Stock Exchange. Unfortunately, you’ll not find all you desire to buy. For example, it may not have enough volume for limited float stocks or small-cap stocks to trade that early.

What can trade premarket and after-hours?

This pre-market and after-market trading activity involves listed securities. Mostly, these are large, liquid stocks and funds.

Since it’s a high-risk engagement, some traders prefer to use the time to analyze the market instead of participating actively. Also, the after-market session starts large then the volume diminishes as the night progresses.

How do you buy before the market opens?

These opportunities are accessible through your brokerage account. Brokers have different terms on when to place your orders and the types available. As such, some say you have to do it the previous day. But others allow premarket stock trading between 7 and 9 a.m.


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