If you’re looking to get a jump on markets, you can engage in premarket trading.
Premarket trading was once largely the realm of professional investors. However, advances in technology and other things have made it easier for “average” investors to also engage in this type of trade. Premarket trading normally takes place between 8 and 9:30 AM. As you are probably aware, the major stock markets in the United States generally don’t open until 9:30 AM.
Why wait until markets are open for business?
Premarket stock trading is perfectly legal and quite popular among traders. However, you should know that volumes are generally quite low and markets aren’t nearly as liquid. As such, the spread between bid-ask prices can be abnormally high. This means that there are some added risks to trading before markets open up. In many cases it’s better to wait until markets are open for business.
Also, because it is more difficult for brokers to facilitate these types of trades, fees for pre market trading can be higher than standard trades. You need to make sure that you take these added costs into account when you’re conducting trades. That’s because they can eat away at any gains you might otherwise secure.
When is it a good idea to transact before markets open?
Of course, you may believe that a company is going to announce important news or something similar, and you may want to get a jump on the action before markets open. In this case, or any similar scenario, it might be worth it to engage in some trading before markets do open their doors and investors react.
One of the most important things investors watch for when they start trading before markets open up are economic indicators. Many government agencies and other authorities release economic indicators around 8:30 AM, a full hour before most markets open up. Sometimes these indicators could have a huge impact on stock prices. Investors need to make sure they take them into account.
For example, Federal authorities might be releasing consumer consumption data. This data could show a surprising jump in consumer activity. As an investor you might want to pick up stocks in Amazon, Walmart, or another company that could benefit significantly from the recently released data. In this case, buying up stocks before markets officially open up might afford you an opportunity to pick up shares before other traders can react.
Where to Get Pre-Market News
If you’re looking for more information on trading before hours, check out CNN premarket, Bloomberg news, and other related websites. Charts for pre-market stock trades are not available on every website. However, they are available on certain news websites and can provide valuable insights.
Keep an eye on how markets are reacting even if you don’t plan on engaging in trading before markets open up. The happenings in the early hours can provide a lot of insight into how markets are going to perform throughout the day. If you see that markets are volatile or sinking, you’ll know that you might need to keep a close eye on your portfolio, for example.
Transacting After Hours
Also, traders can also engage in trades after markets are closed. After hours trading is very similar to pre-market trading, and many of the same upsides and downsides still apply. So if you find yourself wanting to pick up or unload stock after markets close, you may do so.
You should know that not every broker supports trading outside of standard market hours, which usually run from 9:30AM to 4:00PM. While many brokers do support such trades, you should check with your service provider to make sure that it does provide said services.
After hours trading is important because sometimes companies announce important information after markets close down. For example, many companies release their quarterly reports and financial data after markets close. If a company releases its report after hours, you may use aftermarket trading to execute trades based on that information.
Finally, you should also know that many stocks are traded in international markets. For example, you may find stocks for U.S. based company that are trading in Hong Kong or London. While not every stock is listed in international markets, some are, so make sure you keep that in mind.