Although the stock markets in the U.S. open at 9:30 am on weekday mornings, it is possible for investors to begin trading before the opening bell. This is know as pre-market stock trading, and it takes place between 7:00 a.m. and 9:30 a.m, depending on the market. The rules are similar to traditional trading hour, but you potentially face less competition and may have to adjust your sources of information.
Hours of Operation
As an investor in the U.S., the hours between 9:30 a.m. and 4:00 p.m. ET Monday through Friday are your normal hours of business. By contrast, pre-market stock trading on the NYSE takes place between 8:00 a.m. and 9:30 a.m -- just 1.5 hours instead of 6.5. The Nasdaq market, begins pre-market trading at 7:00 a.m. You’ll have to get up early, but not as many traders participate in pre-market stock trading as during normal business hours. Additionally, if an event that drastically affects prices happens while you’re trading, you’ll be among the first to use that news to your monetary advantage.
The comparative lack of participants in pre-market trading can affect you in a few ways. You can experience a lack of trading volume with some stocks during off hours, as well as larger quote spreads on stocks. As a result, you may not find that you’re able to trade as easily as you’d like, or able to receive comparably good prices on anything you trade. Your access to quotes can also be affected because your brokerage might only have access to certain sources during off hours. This can lead to you acting on limited information. Also, while your competition during pre-market hours is more limited, it may also consist of more professional traders who are privy to more information than you are.
If you’re going to engage in pre-market trading, you should pay attention to the action in the major stock markets outside the U.S. The Nikkei market in Japan, Hang Seng in Hong Kong and DAX in Frankfurt, Germany are three major markets to watch for direction. Allow the first 30 minutes of trading after any market opens to establish what direction that market is going in for the day. Although your access to direct quotes could be limited by your broker, paying attention to how stocks are performing in other markets can help shape how you trade during pre-market hours.
In some cases, your trade options during these hours may be restricted to limit orders. However, you can use this to your advantage and protect yourself from potential price volatility. When you place a limit order, you’re sending an electronic message that you only want to buy a certain stock if and when it reaches certain price conditions that you set. It’s like you’re setting up an electronic stock babysitter, so you can spend your time finding other ways to make your investments grow.
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