How to prepare for premarket trading
Trading doesn’t just happen on a single schedule. It’s possible to buy and sell securities either after the stock market officially closes for the day, or before it opens, to begin with. All you need is the right broker and the right strategy to guide you.
Premarket trading is the act of trading on the market before it officially opens. Usually, the premarket opens at about 8 am EST, 1 and a half hours before the official U.S equity market opening times. That might not seem like much time to make some significant trades, but it can be just enough if you have the right plan in place. Here’s how you can prepare for premarket trading.
Gather as Much Information as you Can
The most important thing you can do if you’re thinking of trading in the premarket sessions is make sure that you have access to as much information as possible. It’s up to you to ensure that you’ve been gathering data while everyone else has been sleeping. Check up on the news reports in the industry that you want to invest in and look at sites like Bloomberg or CNBC for official reports.
One of the biggest benefits of the premarket is that it allows you to take advantages of changes in the economy before anyone else. Once you’ve collected as much breaking news as you can:
- Predict what might happen next: Look at your historical information to determine which stocks are a good investment for you, and which are just experiencing temporary fluctuations.
- Look at your risk strategy: Think carefully about how much money you can afford to put into new investments, and how much you can afford to lose.
- Track your social media: Remember that sometimes, social media can deliver breaking news before anywhere else. Pay close attention to Twitter
- Evaluate your open orders: Figure out whether now is the right time to get rid of any stocks that are no longer attractive to you.
Remember to make notes of any stocks that you choose to sell or buy – and what convinced you to take those actions. This will help to strengthen your strategy in the future.
Trading in Premarket Sessions
At first glance, trading in premarket sessions can seem like a complicated concept. However, the truth is that it’s not that much different to standard trading. The more information you have, and the more you can practice your trading strategies, the better your decision-making will become.
Remember, if you’re just getting started with trading, you might need to practice for a while in the standard market before you go into after-hours sessions. Premarket trading is very volatile and has limited liquidity, which means that it can be much harder to make money in this space if you don’t have the right experience. You’ll also need to ensure that you have the right broker by your side to initiate the trades that you want to make at exactly the right times. There are more brokers offering pre-market trading as a service these days, but you’ll still need to pick your partner carefully.