An Introduction To Trading Before The Markets Open

stock market trading before markets open benefits pre-market trades securities

Building a successful portfolio in the investment industry means taking your time to understand the different opportunities available to you and building a strategy that makes sense according to your needs. The more knowledge and skill you develop, the more money you have the potential to make. For some people this even means taking advantage of the trading opportunities that happen before and after the markets officially open. 

There are two kinds of trading that take place when the typical stock market environments aren’t open. The first is premarket stock trading. This is the kind of investing you can do before the standard session occurs for the rest of the day. Most of the time, exchanges like the NYSE open at 9:30am, and the premarket environment allows you to get involved from 8am, or even earlier in some cases. You’ll need a specialist brokerage to use this tool. 

Why Do People Trade In The Premarket? 

Premarket trading activity has limited liquidity and volume, so many people do avoid this option entirely, preferring to stick to the standard hours for buying and selling assets. However, there are ways of getting ahead of the market by using this strategy if you know how to do it correctly. There are some brokers out there which allow access to the pre-market environment as early as 4am from Monday to Friday, depending on who you work with. 

Though there isn’t as much activity in the stock environment this early in the morning, if you know that something significant is going to happen, then this is the time for you to get ahead of other buyers and sellers. You may be able to jump in and make some extra money by taking advantage of a great purchase if you believe that the price of a stock is going to skyrocket. There’s also a chance to potentially reduce your losses significantly. 

Premarket stock trading is just one example of how people can trade outside of traditional hours. The New York Stock exchange introduced this opportunity during the early 90s, and after hours was also introduced as another way to get ahead of the market, so to speak. After-hours trading is a method of using the hours after the stock exchange closes as a chance to get ahead of what happens overnight. 

Do You Need To Invest Before Opening Hours? 

Deciding whether you should get involved with premarket environments is a personal process which requires careful consideration. The market is pretty thin before 8 am EST, so there’s not a lot of benefit to getting into the market so early. It can also be quite risky due to the possible slippage from the bid- ask spread environment too. 

However, there are definitely advantages to consider if you’re in the right circumstances. For instance, you can get an early jump on the reactions the rest of the market has to news releases. The limited amount of volume can also give the perception of certain strengths and weaknesses that you will need to be cautious in evaluating, however.

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