Five things to know before the market opens
Table of Contents
What is Pre-Market?
Pre-Market is the period before the regular trading market opens. Over recent years, as stock exchanges became commonly computerized and stock news from around the world can travel as fast as a “tweet”, the New York Stock Exchange began extending the number of hours of pre-market, as early as four in the morning. Pre-market begins typically at 4:00 AM and ends at 9:30 AM Eastern Standard Time. The regular trading period begins at the opening of the bell at 9:30 AM EST.
Why is Pre-Market important?
The pre-market is very important because it gives you a glimpse of what to possibly expect in the regular market, known as a pre-market analysis. Most professional day traders start their day trading day at the start of the pre-market evaluating the strength and direction of the market in order to have a successful day. Stocks showing strong activity in the hours leading up to market open can be perfect targets for profitable day trades, especially if you know what to look for. Here are 5 things to know before the stock market opens.
During Pre-Market the first thing to know is what stocks are trending. The pre-market is the perfect time to evaluate which stocks are on the rise and at what price they are going to open. This helps you get a general idea of what stocks you may want to trade, especially if they are hot on the market. If a stock is trending on the news, then it is pretty certain it is going to be traded a lot and have high liquidity, but it is not always certain. Although you can trade during pre-market, it is sometimes not favorable because of the limited amount of volume but, one major advantage is being able to get a head start on reactions to news and trending stocks, that is why you must consider these 5 things before the stock market opens.
Pre-market trading activity is generally very light and has limited volume and liquidity, unless the stock has news. Day traders can use the pre-market to take advantage of news releases and updates that aren’t presented during the regular market hours. Market News of major geopolitical events are often reported after regular trading hours, causing massive market changes. As well, any potential wars or natural disasters, for example, can be a major unexpected event that can take the market by surprise at any time.
Having access to the market before the market open allows you to better position yourself and hedge against risk in case of such unforeseeable events and also to potentially take advantage of certain news in your favor.
On the other hand, market news helps give you an idea of what to expect at the opening of the bell, but it is not always for certain. A stock can appear strong during pre-market and then reverse direction during normal market open, just like market news it is always changing, but it is much better to have an idea of what is going on in the market than not at all. News and releases that day traders should pay attention to include but are not limited to economic indicators and earning releases.
Another important thing to know during pre-market is market volatility. During the pre-market, the stock market is pretty volatile. Market Volatility is the up and down movement of the stocks in the market. Pre-market can give you an indication of the market’s volatility, but it is not guaranteed. Price volatility also occurs, and it is due to the many forces outside the regular market time that investors can take advantage of. Knowing how to trade stocks and futures by taking advantage of this volatility is a perfect opportunity for extra profit.
Searching for Active Stocks
Another thing to know during pre-market is how to search for stocks. As mentioned above, economic indicators and earning releases are some of the best ways to search for active stocks. For starters, economic indicators such as price action. At 8:30 AM EST, one hour before the New York Stock Exchange opens, economic releases are issued. Responses in the market set the trading mood for the day.
In addition, earnings releases are the period when publicly traded companies release their quarterly earnings reports which generally happen during pre-market hours. This often causes major price moves in stocks which don’t happen during the regular stock trading hours. These two things are important factors to look at when searching for stocks during pre-market hours, as well trending stocks, market news, and market volatility makes all the difference as well.
Trading Plan/Stock Trading Watchlist
Saving the best for last, the best thing you can do during pre-market hours is to make your trading plan and your stock trading watchlist. After you have read about these 5 things to know before the stock market opens, you will learn that creating a trading plan is one of the most efficient ways to achieve success on the regular and also pre- market.
When you trade with a day trading plan and take time to study the market, and have a day trading routine, you are educating yourself on your trades without going in blind and giving yourself the ability to know what you’re looking for and how you’re going to get it. If you keep up with market news, you can easily know which stocks are trending and understand better the market’s volatility and how to use it to your advantage during pre-market and the regular trading market.
Above all, take the time to set up your day trading routine during pre-market hours. Having an established routine is what truly helps and remember what works for one trader might not work for you but as long as you keep in mind what you have learned here, you are one step ahead. Apply these 5 things before the stock market opens and you could be very profitable. Read up on tending stocks and market news, study the market’s volatility for that day, search for active stocks and make your trading plan and watchlist for the day. So, make sure to set up your alarm(s) and make your coffee, the pre-market is set to open in 5, 4, 3, 2, 1!
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