Which Brokerages Offer Pre-Market Trading?
The stock market is sort of like a business. It has regular operating hours where it’s open and people can make trades and it closes for business at the end of each day.
Typically, once the stock market closes trading ends and people wait until the next time it’s open to buy and sell securities.
However, in today’s ever more connected and online world people sometimes want to buy and sell stocks outside of normal stock market hours. Pre-market and after-hours trading is available from certain brokerages, giving investors the option to buy and sell stocks before the market opens or after it closes.
Pre-market trading can be useful for investors who want to set a different schedule from the market or who want to get ahead of other traders, but there are risks to keep in mind. This article will tell you everything you need to know about pre-market trading.
Which Brokerages Offer Pre-Market Trading?
Many brokers offer pre-market trading to their customers.
Each has pros and cons, so take the time to consider the options before settling on a company to work with.
Robinhood
Robinhood is a well-known, low-cost broker that lets people open an account with no minimums and charges no commissions for trades.
The company offers pre-market trading through its app and website but only lets investors start trading at 9 AM, half an hour before the market opens.
Webull
Webull is an online brokerage company that offers low-cost trading with a slick user interface and mobile app. It’s designed for active investors who want to make frequent trades.
The company offers pre-market trading starting as early as 4 AM, meaning investors will have plenty of time to buy and sell shares before the market officially opens.
Fidelity
Fidelity is a large financial company that offers brokerage accounts and operates its own line of mutual funds.
Investors who have accounts with Fidelity can place pre-market orders starting at 7 AM. Investors can only place limit orders during the pre-market sessions and no orders are accepted between 9:28 AM and 9:30 AM when the market opens.
Charles Schwab
Charles Schwab begins accepting orders for pre-market trading as soon as 8:05 PM the day before the market opens. However, the broker will only execute pre-market orders from 7 AM and 9:25 AM on the day the market opens. You can’t place or execute orders between 9:25 AM and 9:30 AM when the market opens.
TD Ameritrade
TD Ameritrade offers pre-market trading from 7 AM to 9:28 AM on the days that the market opens. The company also offers 24 hour a day trading for certain securities. The broker closes for weekends, so trading for these securities happens on a 24/5 basis rather than a 24/7 basis.
The securities eligible for 24/5 trading are largely major ETFs that cover different sectors or stock indices. For example, investors can trade shares in SPY, and S&P 500 index fund, 24/5 through TD Ameritrade.
What Are Normal Market Hours?
The vast majority of stock trades happen during normal market hours. In the United States, normal market hours run from 9:30 AM to 4 PM Eastern time on weekdays.
The market closes entirely for certain holidays, like Christmas, New Years Day, and the 4th of July.
It also closes early on some days around certain holidays, such as the day after Thanksgiving.
The stock market does not open on weekends.
What is Pre-Market Trading?
Pre-market trading occurs before the market opens on a day when it would usually open.
Typically, pre-market trading begins as early as 4 AM before a normal trading session and runs until 9:30 when the market opens.
However, brokerages that offer pre-market trading may limit you to certain hours, for example only allowing trades starting at 6 AM and closing for trades at 9:25 AM to let transactions settle before the market opens.
Trading during pre-market hours works very similarly to normal trading. You can buy and sell shares in stocks, ETFs, and other securities with other investors who are involved in pre-market trading.
Benefits of Pre-Market Trading
There are a few advantages to trading before the market opens.
Act before other investors get the opportunity
The most obvious benefit to trading before the market opens is that it gives you the opportunity to make moves before other investors who are waiting until the market opens.
If you realize that a company is poised to gain value, trading pre-market lets you accumulate shares before the market opens and other investors look to buy the stock, causing prices to spike. Similarly, selling shares pre-market can let you get ahead of the curve and unload shares before other investors sell.
Pre-market trading also lets you react to company news more quickly, especially if it comes out before the market opens.
More time for trading
For some people, the normal trading hours aren’t very convenient. Trading hours are based on the Eastern time zone, so investors on the west coast, in Hawaii, or otherwise overseas are trading far outside of normal business hours. Pre-market and after-hours trading give these investors more time to buy and sell their shares.
Pre-market trading might also work better for someone who works a regular nine-to-five as it gives them some time before they go to work to do some trading.
If you’re a regular trader and like making lots of moves during the day, pre-market trading also increases the number of hours you have for trading each day.
Risks of Pre-Market Trading
Pre-market trading can be very risky, so it’s important to understand what you’re getting into before you start.
Professional investors
Most investors who are involved with pre-market trading are professional investors with lots of experience behind them. That means you’ll be competing with very good investors who have lots of experience and know what they’re doing. During normal trading hours, there are more amateurs involved in the market which may make it easier to turn a profit.
Low liquidity
Because fewer people are trading outside of normal market hours, there will be less liquidity in the market. That can make it difficult to find shares to buy when you want to buy or find someone to sell your shares to.
Wide spreads
Because of the low liquidity in the pre-market trading hours, there can be larger spreads between bid prices (the highest price someone is trying to buy a share for) and ask prices (the lowest price at which someone is trying to sell a share).
Wide spreads can make it harder to buy or sell shares at a price you desire or make you overpay or undercharge for shares you want to transact quickly.
Order restrictions
Many brokers will limit the type of orders you can place outside of normal market hours, such as only allowing limit orders. Other restrictions may apply, such as only allowing you to trade certain securities during the pre-market session.
Who Should Try Pre-Market Trading?
Pre-market trading can be difficult and risky. Because most other investors involved are highly experienced, you’ll need to know what you’re doing if you want to get involved. The low liquidity and wide spreads can also make it harder to turn a profit.
Pre-market trading is mostly for experienced investors and day traders, but if you know for sure that you want to sell or buy a stock and know the price you’re looking for, there’s little harm in placing a limit order in the pre-market hours.
Most normal investors, especially those with long-term, passive investing strategies won’t need to get involved with pre-market trading.
Conclusion
Pre-market trading gives investors the opportunity to buy and sell stock and other securities before the stock market officially opens.
This gives people more time to trade if they’re looking to add more hours to their day, but there are risks and drawbacks that you need to keep in mind before you get involved.
