Trading opportunities don’t end just because the stock market closes. Investors can still trade news reports and company announcements using the electronic communications networks, or ECNs. Designed to match up after-hours buyers and sellers, pre-market trading has one major disadvantage traders need to consider: With so few investors trading, the low volume can widen the spread between the bid and ask price.
Prepare to Place an Order
Open an online trading account if you do not have one. Be sure the brokerage firm you select allows pre-market trading. Note when the brokerage firm allows you to pre-market trade, as each firm can set its own hours. Before entering a pre-market order, determine if it would be more cost-effective to wait until the markets open to trade.
Find Your Desired Stock
Decide which stock you want to buy pre-market. Go to your trading account order entry page and enter the stock symbol, the number of shares you want to trade and select "Buy" as the action. Before entering the price, check the current bid/ask range. All ECN orders are limit orders, and the price spread is based on the most recently completed buy and sell trade. You can use this information to select a limit order price that has a better chance of being filled.
Enter Your Order
Find the order box on your order entry page. Under routing, select either “pre-market” or “destination.” If you do not make a selection, the order will be deemed as placed for the regular trading session and it will be held until the market opens. Select an ECN from your broker, and route the order by clicking on the trade button. Warning: a pre-market trade placed as a market order will be rejected because the market is not open. It must be entered as a limit order at a specified price to be accepted.
Monitor the trade to see if the order gets filled. ECNs fill orders by matching a buyer with a seller, and until a sell order is placed at your price, your buy trade cannot be completed. Try to enter your price between the bid/ask range. Trade volume rises when the ECNs start matching pre-market trade orders with regular orders from 8 a.m. until 9:29 a.m. EST. An order entered as good till canceled, or GTC, will probably be filled during that time. It's important to note that the bid/ask spread can be wide and could negatively impact your trade once the market opens.
Items you will need
- Online trading account with pre-market trading capability
- Before entering a pre-market order, determine if it would be more cost-effective to wait until the markets open to trade.
- A pre-market trade placed as a market order will be rejected because the market is not open. It must be entered as a limit order at a specified price to be accepted.
- The bid/ask spread can be wide and could negatively impact your trade once the market opens.
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