The pre-market is the period of trading activity that occurs before the regular market session. The pre-market trading session typically occurs between EST each trading day.
Many investors and traders watch the pre-market trading activity to judge the strength and direction of the market in anticipation for the regular trading session. Pre-market trading activity generally has limited volume and liquidity ; therefore, large bid-ask spreads are common. Many retail brokers offer pre-market trading but may limit the types of orders that can be used during the pre-market period.
Several direct-access brokers allow access to pre-market trading to commence as early at 4 a. EST from Monday through Friday. Interactive Brokers Group Inc. It is important to remember there is very little activity for most stocks so early in the morning unless there is news.
The liquidity is also extremely thin, with most stocks only showing stub quotes. Stocks such as Apple Inc. Since the market is so thin before 8 a. EST, there is very little benefit to trading so early. In fact, the slippage from exceptionally wide spreads makes it detrimental in most cases to trade.
Most brokers begin pre-market access at 8 a. This is when the volume picks up simultaneously across the board, especially for stocks indicating a gap higher or lower based on news or rumors. The pre-market indications for a stock can be especially tricky for traders and should only be interpreted lightly.
Stocks can appear strong pre-market, only to reverse direction at the normal market open at 9: Only the most experienced traders should ever consider trading in the pre-market. One advantage is the ability to get an early jump on reactions to news releases. However, the limited amount of volume can give the perception of strength or weakness that can be deceptive and false when the market opens as real volume comes into play.
Market makers are not permitted to execute orders until the 9: Dictionary Term Of The Day. The ability of a company to meet its long-term financial obligations. Broker Reviews Find the best broker for your trading or investing needs See Reviews. Sophisticated content for financial advisors around investment strategies, industry trends, and advisor education. A celebration of the most influential advisors and their contributions to critical conversations on finance.
Become a day trader. What is the 'Pre-Market' The pre-market is the period of trading activity that occurs before the regular market session. Pre-Market Trading Since the market is so thin before 8 a. Get Free Newsletters Newsletters.More...