What is pre-market trading?


Quick Answer

Pre-market trading is the period of buying and selling that occurs before the open of the regular market session, states Investopedia. Pre-market trading usually begins between the hours of 8 a.m. EST and 9:30 a.m. EST. Many traders and investors use the pre-market trading activity to forecast how well the markets may fare during regular trading hours.

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Full Answer

Regular U.S. stock market trading hours are from 9:30 a.m. EST to 4:30 p.m. EST, according to Learning Markets. Many investors use pre-market trading to gain a leg up on investors who normally trade during regular hours. Investors also use pre-market trading to react early to financial news announcements that occur outside of regular market hours.

Pre-market and after-hours trading come with specific risks outlined by the Securities and Exchange Commission, notes Learning Markets. Since pre-market hours have less trading activity than regular hours, securities prices can fluctuate more than regular hours. As there is less trading volume for some stocks in pre-market hours, it may be difficult to execute buy and sell orders due to the lack of liquidity. Another risk factor is the inability to see quotes during pre-market hours. Some brokerage houses only allow traders to view quotes from one trading system during pre-market hours.

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