What is pre-marketing trading and how does it work?

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Typically, yes stock market is open on weekdays (except public holidays) from 9.30 am to 4.00 pm EST. During these hours, millions of people buy and sell securities such as stocks, bonds and options.

While most trading takes place during business hours, it is possible to buy and sell stocks outside of normal trading from 9.30 am to 4. If you are early or just want to start a competition, you can participate in pre-market trading.

What is pre-marketing trading?

As the name suggests, pre-market trading is trading that happens before the market normally opens. Normal hours for pre-sale trading in the U.S. are from 4 a.m. to 9:30 a.m. EST, when the market opens for normal trading hours.

During pre-trading, you can buy and sell shares just like on a normal trading day. However, there are some distinct differences between normal and normal trading.

How does pre-marketing trading work?

Pre-sale trading works similarly to trading in normal market hours, but involves far fewer people. This adds some unique aspects to pre-market trading.

One is low liquidity. Millions of shares change hands during the day, so it’s usually very easy to find someone who wants to buy or sell a particular share. This high level of liquidity means that the difference between the lowest selling price and the highest purchase price per share (called the supply-demand range) is usually low.

There are far fewer people placing orders during pre-sale trading. The range of offers and offers can be quite large or you may have trouble finding someone who would be willing to buy or sell shares of a particular company.

Due to low liquidity, stock prices may also be more volatile in the run-up to the market. Prices can fluctuate sharply up and down, making it difficult to estimate the fair value of a share.

Who can trade in advance and how to get started?

In the past, pre-sale trading was limited to very wealthy and institutional investors. Today, almost anyone with a smartphone or computer can engage in pre-market trading if they have an account with a mediation which allows this.

To test yourself in pre-sale trading, you must first open a brokerage account. Make sure the brokerage you use allows you to trade before marketing. Most major intermediaries, e.g. Loyalty,, TD Ameritrade, in Charles Schwab, allows trading before the market.

Once you open an account, you will need to deposit some money to be able to start placing orders. Depending on the broker, you may also need to fill out some other requirements or fill out forms to be able to trade outside of normal business hours.

Once your account is open and funded, you are ready to get started.

What happens if I place an order and no one wants to buy or sell that share?

During normal trading hours, it is very unusual that no one is willing to buy or sell the stock you want to trade. However, there are fewer investors active in the market during pre-market trading, so you can only place an order and find that there is no one willing to be on the other side of that transaction.

If this happens, your order will be open until someone places the appropriate order. So if you place a purchase order, you have to wait for someone who is willing to sell and vice versa.

If no one places an order before the market opens that would allow you to complete the transaction, most brokers will cancel your order. Many brokers also allow you to set custom rules to cancel orders if they are not met within a certain period.

Can you trade after the market closes?

Just like pre-sale trading, there is also after-hours trading or after-sales trading. Pre-market and post-market trading together consist of extended working hours. When the market closes at 4, trading starts after business hours. It usually lasts until 8 p.m.

Like pre-market trading, after-hours trading usually involves fewer traders, so similar advantages and disadvantages apply.

Advantages of pre-sale trading

Pre-sale trading has advantages that can make it attractive to some investors.

One of the benefits is the ability to move on to news ahead of other traders. News of new products and events that could affect stock prices is not waiting for business hours. They can come at any time of the day or night.

If you spot a story that could affect the stock price, pre-market trading could allow you to take advantage of an opportunity that would be lost if you had to wait for normal trading hours.

Another advantage is that pre-marketing trading usually has fewer participants than trading during working hours. If you are lucky, you may be able to get a good deal from someone who is highly motivated to trade.

Pre-sale trading is also simply convenient. If placing orders early in the day before the market opens is easier for you than trading between 9.30am and 4pm, then this option can make your life a little easier.

Retail trade risks

Pre-trading can also be risky, so it’s important to understand the risks before you start.

One of the major risks is that fewer participants increase both volatility and the range of supply and demand for shares. This volatility may make it more difficult to estimate the fair value of shares.

The larger gap between supply and demand also means that you can place an order and fulfill it at a very different price than expected. For this reason, the use of limited orders is very important.

With a market order, your buy or sell order will be fulfilled at the best available price, regardless. If you use a limited order, you can set a minimum sale price or a maximum purchase price, which means you won’t accidentally sell for much less than you want, or buy at a much higher price than you want. For example, if you set up a sales restriction order with a minimum price of $ 50, your order will only go if someone wants to buy those shares for $ 50 or more.

Another risk of pre-market trading is that, despite increasing availability, it remains most popular with experienced and professional investors. Competing with very experienced investors can make it harder for you to make a profit.

Learn more >>> How does the stock market work?

Bottom line

Pre-sale trading offers investors the option to buy and sell shares before the market opens. This can help you keep up with the news before other investors get a chance to do so, but trading before the market is not without risks. Due to low liquidity and large bid and ask spreads, it is important that you trade carefully and know what you are doing before placing an order to buy or sell.

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