To participate in premarket trading, an investor must have either a full-service or online brokerage account. A superior knowledge of the stock market is also advisable, as premarket trading differs from trading during normal market hours.
Premarket trading is a part of extended-hours trading, which also includes after-hours trading. Premarket trading begins at 8:05 p.m. on the previous trading day and ends at 9:25 a.m. Trades made during premarket trading are executed between 8:00 a.m. and 9:25 a.m. All times are Eastern Standard Time.
Both full-service and online brokerage accounts allow premarket trading. To execute a trade with a full-service brokerage, an investor must call his broker and authorize the broker to buy or sell on the investor's behalf. To execute a trade through an online broker, an investor must log in to his account and execute a buy or sell order.
Significant differences exist between standard trading hours and premarket trading. These include the types of securities that may be traded, the maximum number of shares that are traded in a single order, the difference or spread between bid and ask prices and the speed at which orders are executed. Also, individual investors who trade premarket are trading against investment professionals who have access to more information.