Guest Post

Should Premarket Trading be Part of your Strategy?

Have you ever wished that you could trade outside of the typical stock market opening hours? Between 9:30 am and 4:00 pm every day, the stock markets are packed full of people looking to buy and sell securities for a profit. However, if you’re the kind of person who works 9 till 5 and trades in your spare time – this isn’t much good for you. Even if you’re a full-time trader, you might not want to stop trading just because the bell rings and the stock markets close. The good news is that there are plenty of ways to trade outside of the typical market hours. All you need to do is decide whether you would prefer to do your out-of-hours trading before the market opens, or after it closes.

What is Premarket Trading?

As the name suggests, premarket trading is the kind of trading you can do before the stock market officially opens for the day at 9:30. Depending on what type of electronic communications network you use, you can begin looking for trades from as early as 4 am. This gives you plenty of extra time to track down a great deal.

The values of assets in the stock market continue to change, influenced by socio-economic, political, and other factors, even when the markets aren’t open. As such, there are several advantages involved with premarket trading if you know how to use it correctly. However, the market is also more volatile and less liquid during the after-hours and pre-market trading sessions. That’s why it’s so important to make sure that you have a strategy in place before you begin putting your finances at risk.

The Advantages of Premarket Trading

One of the biggest benefits of premarket trading, is the convenience that it affords. If you don’t have the time to place trades during the normal trading schedules due to your daily commitments, pre-market sessions allow you to overcome this issue. What’s more, when you’re trading outside of regular hours, you can make sure that you respond quickly to any changes in your stock values caused by news events.

Remember, a lot of companies release earning information after the close of the typical session, trading after market, or before the market opens gives you a chance to get ahead of the competition, which could mean that you make more money on your securities. The same concept holds for people who rely on technical analysis for their tradition decisions too. Many technical oriented traders use closing price figures and volume information to calculate the benefits of their trading actions.

Some economic reports such as monthly employment reports can hit the market at around 8 am ET, which is long before the opening of the regular session. With pre-market trading, you’ll have more opportunities to sell or buy valuable assets, before the prices change with the opening bell.

Is Premarket trading Right for You?

While there are benefits to premarket trading, it won’t be the right solution for everyone. The quotes that you see in the pre-market session aren’t consolidated, and there’s a lot less liquidity when you’re trading in the early hours of the morning – because fewer people will be available for buying and selling. Before you commit to premarket trading, make sure that you consider the positives and negatives carefully, and determine whether out-of-hours trading works with your strategy.

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