How to Trade Pre-Market

The 24-7 news cycle has made trading a full time job. Electronic trading enables investors to react instantaneously to market-moving news even when exchanges are closed. Any trading done before regular market hours is considered pre-market action. Trading is done through the Electronic Communications Networks without stock exchange controls. Normal trading hours at most major American exchanges occur from 9:30am eastern time to 4pm eastern time. Bond and commodity markets generally open and close before equity markets.

The advantage of pre-market trading is the ability to enter a position prior to heavier volume associated with regular market hours. Non-day traders and more passive investors generally execute orders if they are unable to during market hours. The disadvantage of trading pre-market is that bid-ask spreads are comparably wide compared to more liquid, exchange traded sessions. Greater volatility is also usually associated with pre-market trading. Most brokers offer pre-market hours trading compatibility.