The introduction of new technology made it possible for investors to trade even when the market closed. The ability to trade before the market opens is known as premarket trading. For more details on this, please read on.
What is Premarket Trading?
It’s the trading period that occurs before the normal market session opens. Premarket trading usually occurs between 08:00hrs and 9:30hrs EST. However, it can start as early as 04:00hrs in some markets.
Extended trading hours didn’t exist in the United States until the early1900s. The introduction of the internet saw the U.S. offer more trading hours in response to stiff competition from foreign markets.
Investors monitor the premarket trading activities to determine the market’s direction and strength. Trade in premarket also helps them anticipate their next move.
Traders can make the best premarket movement outside the Nasdaq and NYSE’s regular session.
Premarket Trading Benefits
The premarket session lets you react to overnight news before the market opens. Some of this news includes corporate earnings or major firm announcements like geopolitical news from overseas.
The premarket has made trading convenient, especially for do-it-yourself traders. After all, our busy schedules can make it hard for us to trade during normal times. Therefore, the ability to trade in premarket before leaving the house gives us an advantage.
Experienced investors know where to get the right information and take advantage of the early hours. After all, you can get better prices before the market opens and become volatile. You can get more details on financial assets from the CNN futures premarket section.
Premarket Trading Risks
Unfortunately, retail premarket futures traders face stiff competition from institutions. Remember, some of these institutions prefer trading before the market opens. Plus, they have more capital and can easily access timely pre market data.
Compared to the normal trading hours, the number of traders is fewer in the premarket. Therefore, the premarket stock volumes tend to be low. This can result in wide bid-ask spreads, greater volatility, and limited liquidity.