When and How to Trade Stocks on the Pre-Market?

What is the Pre-Market, and How Does it Work?

Pre-market trading typically occurs at 4:00 a.m. EST on weekdays before the regular trading hours commence. During the pre-market trading hours, investors can place limit orders, market orders, and other advanced types of orders, such as stop orders and stop-limit orders permissible by the broker.

Furthermore, trading activities during pre-market hours are executed through electronic communication networks (ECNs) or alternative trading systems (ATSs), which match buy and sell orders from investors outside the regular trading hours.

However, it is worth noting that not all brokerage firms support pre-market trading. So, investors should ensure that their broker of interest supports premarket trading.

Best stock brokers

1

9.4/10

Go to broker

eToro is a multi-asset platform which offers both investing in stocks and cryptoassets, as well as trading CFDs.

Minimum deposit:

From $100

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The eToro broker was founded in 2007. The company promotes itself as a social trading platform working with traders from over 140 countries. The broker has several divisions operating under different jurisdictions and licensed by different regulators. For example, eToro (Europe) is licensed by the Cypriot regulator CySEC (109/10) and eToro (UK) is licensed by the British regulator FCA (583263). The broker also has a representative office in Australia and the USA.

Pros/Cons

•High level of reliability ensured by the licenses of respected regulatory authorities and participation in the compensation funds.

•Wide selection of assets quoted at stock exchanges in the UK, U.S., Australia and Asia.

•An opportunity to combine active trading with social trading and passive investing.

•Zero-fee trading of a number of stocks.

•Access to ready-made diversified asset portfolios with various risk levels.

•Provision of leverage, educational materials on various markets and user-friendly trading platforms that can run on any device.

•Zero fees for portfolio management, depositing funds and account maintenance.

•High minimum deposit for users of a number of countries.

•No live chat on the website for quick connection to customer support.

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2

9.2/10

Go to broker

Your capital is at risk.
Via eOption's secure website.

Minimum deposit:

$1

Review

The eOption broker (eoption.com) is an American stockbroker headquartered in Glenview, Illinois. It has been operating since 2007 and is a member of FINRA (CRD#: 7297/SEC#: 8-21765) and SIPC. It specializes in options trading and also acts as an intermediary in trades involving the popular securities classes. The company offers low trading commissions, super-fast execution of orders, and modern platforms with an advanced set of analytical tools. In 2020-2021, eOption was recognized as the best options broker by several resources such as Investopedia, The Tokenist, Benzinga, Investormint, and NerdWallet.

Pros/Cons

•Low commissions for options trading — $0.10 per contract plus $1.99 per trade.

•No minimum deposit requirements for cash trading accounts opened by US residents.

•FINRA membership and the protection of clients’ funds are available through Securities Investor Protection Corporation (SIPC).

•Access to professional trading platforms such as DAS and Sterling Trader Pro are developed by third-party software developers for the proprietary eOption terminal.

•An affiliate program with high rewards.

•Compensation for commissions for funds or assets from other brokerage firms and institutions transfer.

•Prompt support by phone and online chat in the trading platform during company business hours.

•The narrow range of choice of investment solutions to generate passive income.

•You cannot trade Pink Sheet and Bulletin Board stocks.

•There is no online chat on the company's website.

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3

9.1/10

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Minimum deposit:

$250

Review

The Ally Bank broker is part of Ally Financial Inc., which is an American holding company. The original company was created in 1919 by the General Motors automobile corporation to conduct activities with its auto parts suppliers and associated automobile dealerships. In 2014, Ally started offering banking products, and since 2017, it has also offered brokerage services. Currently, it operates solely as an online bank and brokerage firm and has no physical branches. It does, however, offer favorable terms of cooperation at consistently competitive rates with professional round-the-clock support. The company's services are used by more than 8.1 million customers globally.

Pros/Cons

•It has official licenses for banking, dealer, and brokerage activities from reputable US regulators.

•A wide range of assets is available such as currency pairs, metals, securities, and options.

•There is an opportunity to invest in diversified portfolios for passive profit.

•The company works only with US tax-paying residents.

•On the broker's website, there is no training on trading in various financial markets, nor is there a Forex glossary of terms.

•There are high commissions for withdrawing funds and the company does not compensate customers in any way.

•Only registered users can ask a question in the online chat.

•There is a time-consuming procedure for opening an account, which in some cases takes up to two weeks.

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Factors Influencing Pre-market Trading

Let’s consider some of the salient factors that influence pre-market trading activities:

• Earning Report: Companies often release their corporate earnings reports quarterly or annually before the regular trading session. Such financial reports, positive or negative, can significantly impact the movement of stock prices during pre-market trading hours

• Economic Data Releases: Another contributing factor to pre-market trading is the release of economic indicators such as GDP figures, inflation data, unemployment reports, and consumer survey reports. Strong or weak economic data can also impact investor sentiment and stock direction before the official trading hours

• Global Events: Events such as political instability, geopolitical tensions, central bank decisions, or economic developments around the world can impact investor sentiment and drive trading activities during pre-market sessions

• Corporate News and Announcements: Finally, sudden news related to company acquisitions, big partnerships, mergers, legal issues, etc., can also influence pre-market trading

The Pre-Market Hours

The pre-market trading hours vary based on time zones. It is worth noting that pre-market hours can vary depending on exchange policies, weekends, the transition between standard time and daylight saving time, and broker-specific terms and conditions (for example, TD Ameritrade allows pre-market trading starting from 7:00 AM ET).

So, here is a general overview of the Pre-market hour’s local time for different stock markets:

How Pre-Market Trading Affects Stock Prices

Pre-market trading can affect stock prices in several ways. One of the possible impacts of pre-market trading on stock is price discovery, which results from the reaction of investors to sudden news and events. Such reactions can potentially change stock prices due to supply and demand dynamics.

Additionally, not all investors participate in pre-market trading sessions. Hence, this limited participation means that the actions of a small group of investors during the pre-market hours may not fully reflect the broader market sentiment when regular trading activities commence.

Furthermore, trading activities during pre-market sessions can have a significant impact on the opening price of the regular trading hours. For example, if there is significant buying or selling pressure during the pre-market session, it can lead to a price gap between the closing price of the previous day and the opening price of the next day.

Pros and Cons of Pre-Market Trading

To trade during pre-market hours, you need to have an account with a broker that allows you to participate in the pre-market activities. While pre-market trading offers numerous benefits, it also comes with certain risks. Let’s consider the merits and demerits of pre-market trading below:

Which Brokers Allow Pre-Market Trading?

Pre-market trading was limited to institutional investors, market makers, and non-net-worth individuals. However, these biases and restrictions have changed due to the evolution of electronic trading networks in the financial trading industry. This evolution has caused more brokers to offer extended trading hours, which allows retail investors to buy and sell available stocks during pre-market trading hours.

How to obtain pre-market hours trading?

Typically, you need to have an account with a brokerage firm that supports pre-market trading to participate during the trading session. So, here is how you can have access to pre-market trading hours:

• Choose a brokerage firm that offers pre-market trading access

• Open a trading account with the broker and verify your identity. Fund your account afterward

• Carefully read the broker’s rules and restrictions (if there are any) on pre-market trading

Here’s a list of top online brokers recommended by Traders Union that support pre-market trading activities:

Tips for Trading Stock on the Pre-Market