How to Trade Pre-Market
The New York Stock Exchange's session runs from 9 a.m. to 4 p.m. EST. Both before and after this regular session, trading goes on via electronic networks. Because there's no market maker to match buyers and sellers manually, the trades must match in order to be executed. Most retail brokers offer premarket trading, but restrict the types of orders that can be used.
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Instructions
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Check bid/ask. The same source that gives you real time quotes during the day likely offers a bid/ask spread during pre-market hours. Beginning at 7:30 a.m. EST, the electronic trading networks accept conditional orders that determine the highest bid and the lowest asking price. Use this information to place a trade if you are looking to have it executed.
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Choose premarket. Whether called after-hours or premarket, retail platforms typically require a trader to specify the session in which they want to place an order. An order placed during off hours for the regular session will be held over until the next session unless it is specified as a premarket trade.
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Enter conditional orders. Premarket trades are restricted to limit orders. Whether buying or selling, the order will only be executed if a corresponding order for the same price exists. A trader can enter a limit order for any price, but it is not guaranteed to be executed. If the limit price entered is within the bid/ask spread, the chance of execution increases.
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Keep trades open. Starting at 8 a.m. EST, the electronic system begins to match existing orders for the regular session. Thus, it is possible for an order designated "GTC," or Good 'til Canceled, from a previous session can actually be matched and traded between 8 a.m. and 9:29 a.m.
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Tips & Warnings
The bid/ask spreads during premarket time are usually much wider than during the more liquid regular session.
Prices during the premarket session do not always reflect how a stock will react during the regular session. Be cautious when reacting to overnight news by trading in the pre-market. Though reasonable care and diligence was used in writing this article, it should not be relied upon solely, and is not a recommendation to trade in the premarket. Consult your broker when placing premarket trades.
