How to Buy Stocks Pre-Market
Buying a stock during the pre-market allows one to purchase or sell a stock before the actual trading day starts. The trading is done through ECNs (Electronic Communications Networks) that match buy and sell orders of participants. The advantage of this market is that it allows traders to make trades as news is coming out, and potentially get better prices before the general market reacts to the news. However, there are disadvantages; since it is pre-market, fewer participants are online, causing trading volumes to be reduced and bid/ask spreads to be wider.
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Instructions
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Open a brokerage account with a major online brokerage firm that permits pre-market trading.
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Check your brokerage firm's pre-market trading hours, as there are slight differences between different companies. Pre-market orders can only be submitted during pre-market hours.
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Place orders using the brokerage firm's order entry page. If you are using the firm's trading platform for placing trades, use the order entry window from the platform.
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Enter your order by filling in the stock symbol, number of shares, whether it is a buy or sell order and the price. For pre-market orders, only limits are permitted, no market orders. A limit orders contains a specific price at which the trade is to be executed, while a market order is an order to be executed at the best "current" price possible.
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Route the order to a pre-market exchange. The order ticket will probably have a box to click for "pre-market." If not, there will usually be a box that states "destination." Here you will enter an ECN as the destination (check the instructions with your brokerage account, as each firm has its own policy for how pre-market orders are routed). Enter the order.
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Tips & Warnings
Only limit orders are available for pre-market trading; any market orders placed will either be rejected or automatically be placed to be executed during normal market hours.
Because of the risks and trading disadvantages involved, traders should use caution before trading in the pre-market.
