You would think six and a half hours a day is plenty of time to trade stocks. But, it’s possible to trade pre-market as well as during extended hours after the major exchanges close.
When Does The Stock Market Open?
The U.S. stock market is open from 9:30 a.m. Eastern time (ET) to 4:00 p.m.
These “regular” hours are the best times to trade. Lots of activity takes place then, with much buying and selling.
This provides high liquidity, making it easier to get in and out of positions.
What Are The Stock Market Pre-trading Hours?
Some brokerages offer trading before the 9:30 New York opening time. Some direct access brokers start trading as early as 4:00 a.m. (ET).
Even the popular Robinhood platform allows pre-trading beginning at 7:00 a.m., as well as offering extended after hours trading until 8:00 p.m. in the evening.
Should I Buy A Stock Before The Market Opens?
Trying to get a jump on a stock move by trading pre-market can be done, but can be risky.
Even the first few hours of regular hours trading can be the most volatile of the day. In fact, many day traders stop trading by 11:30 a.m., after which volatility settles down.
Trying to buy and sell stocks during pre-market hours can be difficult, because liquidity is low. With relatively few people trading at this time, it is hard to get orders filled, and at a fair price.
Consider Reading:
What Is A Stock Portfolio And How Does It Work?
How to Find Undervalued Stocks for Your Stock Portfolio
What Stocks Pay Dividends: How to Build Wealth Through Dividend Stocks
5 Things To Know Before The Stock Market Opens Today
1. The S&P 500 futures will give a hint as to what direction the market is likely to move at the open.
“Futures” are financial contracts that are bought and sold. Just like stocks, future contracts are traded on exchanges. They are “derivative” financial contracts, as are options contracts.
“Derivatives” are financial instruments whose value is based on some other underlying asset, such as commodities like crude oil, natural gas, gold, silver, corn, soybeans and sugar.
Regarding pre-market stock trading, you will be specifically interested in the movement of the S&P 500 Futures. The S&P 500 (Standard and Poor’s) is made up of 500 huge companies listed on the U.S. stock market.
The S&P 500 index, ticker symbol SPY, is traded just like any stock, and can be traded on any brokerage platform.
The SPY is an ETF (an exchange-traded fund) which is about 1/10th the price of the SPX, the “mother of all market indicators”.
The SPX tracks the S&P 500 index itself, but for traders, the SPY is much less expensive to trade, yet moves in concert with movement of the SPX.
We are interested in the S&P 500 because it shows the general opinion of “the crowd” (investors). The S&P 500 futures can be used as an indicator as to the direction the market as a whole is likely to move today.
Global markets move while those of us in the U.S. are asleep. Futures trade 24 hours a day, so we can get a feel for the U.S. market before it opens by examining the futures market.
Global markets will affect index futures, so we can see in advance of any affect global markets (geopolitical news, earthquakes, war, weather and such) will have on the U.S. market today.
2. Continuing with the importance of monitoring the S&P 500 futures, any U.S. events and financial news that happened overnight will have an affect on the U.S. market today.
The ticker symbol for futures is preceded by a forward slash. You will be most interested in the S&P 500 “E-MINI” futures, ticker symbol /ES. Not all charting software and trading platforms will accommodate futures.
TastyWorks.com is one that does allow futures trading.
Investors pay most attention to these futures:
- /ES The E-MINI S&P 500 futures
- /NQ The E-MINI NASDAQ 100 futures
- /RTY The Russell 2000 Index futures
- /CL Light sweet crude oil futures
- /GC Gold futures
- /SI Silver futures
- /BTC Bitcoin futures
To see the S&P 500 futures (as well as the NASDAQ and Russell), you can go online to:
https://finance.yahoo.com/lookup
3. Scan the news for any events that happened overnight that could affect the stock market.
As mentioned in 1 and 2, the S&P 500 futures might alert you that something happened that will affect the market.
This includes both the U.S and worldwide markets. You will want to know what specifically happened so you can be prepared for how it might affect any stocks you own or are planning to purchase.
4. Scan the news for any corporate or financial news, as these events can also affect the market at the opening.
Pre-market news of a company being sued, having a change of leadership, announcing a product launch, or the FDA approving a drug can affect certain sectors, and cause a gap up or down at the market open.
5. Consider the sectors that the stocks you own or are considering owning are in, and how they are performing in comparison to others.
If a sector is in a downtrend, buying any individual stocks in that sector could be unwise at this time.
What Are At Least 5 Things You Need To Know Before Investing In A Stock?
1. As explained above, you will want to get an idea as to the overall direction of the stock market on the day you plan to buy a stock. Look to the futures for guidance.
2. Identify the strength and trend of the sector in which the stock you are considering falls under. Sectors include utilities, health care, technology, energy and the like.
This may be an opportune time to buy, or maybe not. You can find sector comparisons free at finviz.com. Click on “groups” on the home page.
3. As mentioned earlier, scan the news for any events that happened overnight, both in the U.S. and with foreign markets. Remember, Australia, New Zealand and Asian markets open at 18:00 and close at 03:00 Eastern time, while Europe trades from 03:00 to 09:30.
A big drop or rise in these markets, while we were sleep, can affect what the U.S. market will do at the open.
4. Search Yahoo and other sites for any news on the specific stocks on your watch list, such as corporate head changes and earnings announcements.
5. If planning to buy shares of a stock, check the price spread between the bid and ask prices.
You will want this spread to be small. Apple (AAPL), for example, is a huge company with lots of liquidity, and will have a spread between of only be a few cents. Stay away from stocks with bid/ask spreads of 30, 40, 50 cents and higher.
5 Things To Know Before The Stock Market Opens Conclusion
The S&P 500 futures drives the stock market. World events that can happen overnight can shock the U.S. stock market, causing a volatile open.
The futures market will reflect those world events and markets, and give you a heads up in pre-market and opening market trading.
Pre-market data on world markets, currencies, bonds, commodities and the major future indexes (S&P 500, Dow, NASDAQ, etc.) can be found online at:
• cnn.com/business/markets/premarkets
• CNBC.com
Be aware that investors often have a dramatic knee-jerk reaction to news. Markets can be volatile, but soon calm down.
The crowd can easily change its mind, and feel that the event isn’t as important as they thought. Also, remember the old traders’ saying: “The market can do whatever it wants whenever it wants!”