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How can you use CNBN premarket data for stock trading?

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Quick Answer

Premarket futures data can be used to estimate stock market opening levels, according to Chron. This is because stock indices at market opening typically mirror price changes in overnight futures trading. Up-to-date premarket futures data is available on websites of financial news vendors such as CNBC.

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Full Answer

The value of a substantial majority of futures products is determined using stock indices, states Chron. For this reason, price movements in futures trading typically parallel those in the broader stock market despite the fact that these instruments, which are also known as derivatives, are not traded in stock exchanges. For instance, if premarket data indicates that the overall price of futures has increased by by 2 percent, the S&P 500, the Dow Industrial Average and other stock indices are likely to be up by the same margin at market opening.

Updated premarket futures information can be found on many financial trading software platforms and on the Internet portals of business news television channels such as CNN Money, notes Chron. Using premarket futures data to guesstimate stock market opening levels is particularly useful because, unlike the stock market, derivatives trading goes on around the clock. The prices of these instruments can thus reflect the overall opinion of financial markets on pertinent events hours before the stock market begins operating.

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