The forces of demand and supply determine the prices of stocks and other financial instruments during premarket trading, according to Zacks Investment Research. Premarket prices are typically a reflection of prevailing information and cumulative investor sentiment. This form of trading allows participants to profit from freshly released information before the market opens. Premarket data, including prices, is available at financial news outlets such as CNN Money and CNBC and stock exchange websites such as Nasdaq.com.Continue Reading
Similar to normal sessions, premarket trading prices reflect investor reactions to information that includes significant political events, corporate earning reports and government economic data, notes Slav Fedorov, writing for The Nest. The effects of these reactions sometimes spill over into standard trading sessions.
Premarket trades originate from retail investors or professionals representing mutual funds and other large organizations and are executed by brokerage firms through specialized computerized systems, explains Zacks Investment Research. Commencement times for premarket trading, which is only conducted on weekdays, vary by individual stock exchange and can be as early as 4 a.m. Eastern Time. Sessions close at 9.30 a.m. EST.
Premarket sessions are typically characterized by comparably lower trading volumes, notes Zacks Investment Research. This limits liquidity and makes it more difficult to execute trades. For these reasons, price movements lack the momentum that pervades normal trading sessions. Delay or failure due to communication problems or computer malfunction, larger spreads between bid and ask prices, and greater price volatility are other notable characteristics of premarket trading.Learn more about Investing