New York City, home of Wall Street, has always been the “city that never sleeps,” but now the interconnected global financial world never sleeps, either. Your own schedule or investing strategy may require the placing of a pre-market order, an order placed before the regular trading session begins. On normal business days, regular trading hours are between 9:30 a.m. and 4 p.m.
Basics of Pre-Market Orders
The pre-market trading session takes place each trading day between 8 a.m. and 9:30 a.m. EST. Buying pre-market relies on using a broker permitting such trading, but most of the top brokers do. Charles Schwab, for example, allows the placing of pre-market orders between 8:05 a.m. of the prior trading day and 9:25 a.m. of the trading day. The brokerage executes these pre-market orders between 7 a.m. and 9:25 a.m. EST.
All pre-market orders take place via electronic markets, not the exchanges available once the trading day commences.
Pre-Market Order Limitations
In the past, only institutional investors such as banks, mutual funds, insurance companies, hedge funds and the like could place pre-market orders. While pre-market orders are now available to all brokerage clients, they are best used by experienced private investors. Before attempting to place your first pre-market order, watch pre-market trading for a while so you can gain an understanding of the process. Your broker’s platform should also have tips regarding pre-market trading.
Pre-market orders aren’t placed as easily as orders placed during regular hours. Only limit orders are accepted pre-market, with orders directing the broker to buy or sell shares at a specified price. Keep in mind that if the shares are trading outside of your designated limit, the broker will not execute the order.
There are limitations on the orders, too, with 25,000 shares the usual maximum per order. Pre-market orders are only honored for the particular session in which they are placed. While pre-market orders aren’t carried over into the regular session, there is no guarantee they are placed during the pre-market session if the trading activity is significantly low.
Clear Delineation of Orders
When placing a pre-market order on your broker’s platform, it’s critical that you clearly delineate the order as such. Otherwise, the brokerage considers it a regular order, executed once standard hours begin. Before you trade, check out pre-market trade prices as they go through so you can see the trend. Once you determine your buy or sell price, you can place your order.
If you want to avoid trading outside the limits so that your order isn’t placed, check the bid price if you want to purchase the shares and the asking price if you want to sell them. Your trade will go through immediately, either buying or selling, if you place your order at the current bid or ask prices.
Keep track of your trade, especially if you are unsure of whether the order was executed or if prices are moving away from your limit. You can adjust your price if the shares are moving in a different direction so that your order is executed. There is usually greater price fluctuation in the pre-market, as well as greater volatility and wider spreads between the bid and ask prices, or the supply and demand.
In many ways, the pre-market remains the venue of the professional trader. When the market moves quickly, expect to adjust the price several times prior to order execution.
Placing Post-Market Orders
Just as there are pre-market orders, so there are post-market orders, although they are better known as after-hours orders. Whether buying or selling after-hours, these orders are placed after the market’s close, usually starting as early as 4:05 p.m. EST and continuing until 8 p.m.
- If you’ve never placed a pre-market order before, ask your broker to walk you through the procedure or at least watch pre-market trading to get a good feel for how things work before entering actual trades.
- If you want to get a better price, try to set your sell limit slightly above the current bid or your buy limit slightly below the current ask. Just remember that if you get no takers your order won’t be executed.
- Pre-market trading can be volatile. You should have a solid reason why you can’t wait for the opening.
A graduate of New York University, Jane Meggitt's work has appeared in dozens of publications, including PocketSense, Financial Advisor, Sapling, nj.com and The Nest.