U.S. stock markets are open for business from 9:30 a.m. to 4:00 p.m. EST every business day, except for statutory holidays. Thousands of individual and institutional investors trade on these markets, either directly or through third-party brokerage accounts. Hundreds of millions of shares and thousands of stocks worth billions of dollars trade daily. Trading is also done on a limited basis in premarket and after-hours trading sessions.
Premarket trading is usually from 8:00 a.m. to 9:30 a.m., and after-hours trading from 4:00 p.m. to 6:30 p.m. Individual and institutional investors participate in these sessions. Stock prices and trading activity display on brokerage websites and on free online sites, such as Yahoo! Finance and CNN Money. The additional trading hours help investors react to news, such as earnings releases and merger announcements, often announced outside of regular trading hours.
The "high" and "low" prices refer to the highest and lowest prices paid for a stock during a premarket or an after-hours session. The "last sale" price refers to the most recent price at which the stock traded and "volume" refers to the total number of shares traded during the session. The "Percent Change" refers to the difference between the last sale price and the price at the 4:00 p.m. EST regular market close, expressed as a percentage of the closing price.
Premarket and after-hours trading involve significantly lower volumes than regular trading hours. This means higher bid/ask spreads, which is the difference between the buyer's bid and the seller's ask prices. Therefore, investors are generally advised to enter limit orders rather than market orders to avoid having their trades executed at unfavorable prices. Market buy orders are executed at the seller’s ask price, sell orders at the buyer’s bid price; limit orders specify the price at which the order must be executed. S. Wade Hansen of the Learning Markets website notes other characteristics of premarket and after-hours trading, including computer delays and competition with professional institutional traders who may have access to more proprietary information.
John Jagerson of the Learning Markets website notes that premarket or after-hours stock trades may not offer any advantages to traders. If there is market-moving news on a stock, such as a disappointing earnings report or a takeover, this information is instantly disseminated to most market participants who can and often do react immediately. So trading during those hours is highly unlikely to provide any kind of an advantage for an investor; rather, lack of liquidity and high bid/ask spreads may prove to be net negatives.
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How Pre-Market Stock Trading Works
Pre-market trading, along with after-hours trading, is part of extended-hours trading that takes place outside of the regular trading hours of 9.30...