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What is pre-market stock trading?

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Quick Answer

Pre-market stock trading is a term used to refer to trading that takes place before the opening of a stock market. The regular hours meant for trading for a stock market begin at 9:30 a.m. Eastern Time, while pre-market stock trading between 8:00 a.m. and 9:30 a.m.

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What is pre-market stock trading?
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Full Answer

A majority of investors trade in pre-market as well as after-hours trading time, notes Learning Markets. This is because of the aspect of competition, in which they are forced to act quickly whenever news announcements are made regarding the closure of the regular market.

Individuals, dealers and banks can easily engage in pre-market trading stocks, commodities and stock futures before the stock market officially opens at 9:30 a.m. Trades in pre-market stock are executed as well as quoted through the use of an electronic type of stock-trading network, explains Learing Markets. Instinet or Archipelago runs such networks.

Most often than not, the spre-market trading session is attended by professionals only. Since there are a few people who are available to trade in those early hours of the day, there are wide spreads between sell prices and a stock’s buy. The company’s shares may also turn out to be scarce. In such a scenario, a person who is pre-trading shares has resilient views and significant detailed information regarding a company. Therefore, pre-market stock trading takes place before the official time of stock market opening.

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