If you are exploring the trading world then you must be aware of the fact that pre-market trading session uses to occur each trading day between 8-9.30 a.m. EST. It means the trading session that occurs right before the regular market session is termed as Pre-Market. Most of the traders prefer to analyze the ups and downs of the market in this session so that they can have a better idea about strengths and possible direction of the market.
Many brokers in U.S. allow their customers to trade between pre-market hours but the procedures; cost and hours usually vary by a certain range.
Things to know about Pre-Market:
There are so many interesting facts to know about premarket trading. It is often known for its limited liquidity and volume. Most of the retail brokers prefer to work with pre-market trading; a preferable time for such type of trading in U.S. from Monday to Friday is 4 a.m. EST. In most of the cases, these early morning hours use to have very little trading activity unless there is a special news about trading. The Nasdaq Market starts its pre-trading hours at 7 a.m. whereas NYSE considers 8.00 a.m. to 9.30 a.m. as pre-market trading hours.
Studies reveal that as a number of traders connected to exchanges use to be very less during pre-trading hours so such kind of trading can lead to variable effects in short term. Your trading experience may go smoother and it is also possible to avail good price ranges for the currency you prefer to trade. However, in this session, you will be able to have access to limited information with limited competitive forces.
Benefits of Pre-Market Trading:
The biggest benefit of Pre-Market trading is to take the fast reaction to any trading news as like earning reports. Note that, when normal trading starts, the stocks already complete their normal trading reactionary moves so it may be too late to make any investment to take the benefit of earning a reaction.
But at the same time, the pre market also uses to face some risks. There are three potential risks in this market that do not show their impact on normal trading hours. The list includes wider spreads, lower liquidity, and higher volatility. The term wider spread means that there can be several bid spreads during the pre-market session. These limited trading hours use to have few options for buying and selling so traders often find lesser chances to make transactions at competitive price ranges. The volatility goes higher when the market receives any news about certain kind of stock.
If you are an expert in strategic planning and can handle the stock market reactions with news release then you can easily make profitable exchanges from the Pre-Trading market. But at the same time you need to make efforts to save yourself from the volatility of potential prices. However, the market price predictions in this session can be proven false when real day trading market begins due to limited currency volume. So, one should have deep market observation before investing in Pre-Market sessions.