In monthly trading reports and in articles I recall pre market trading. That is in premarket hours so before 9.30 A.M. I would like to introduce you to this subject matter, so you could understand how it differs from trading during regular market hours. Many of you, in fact, associate the market only with regular trade hours.
In US it looks much differently. You can trade in hours preceding beginning the regular trading session. This is so-called pre-market. What’s more, you can also trade in hours after the regular trading session, in so-called post-market (but about it in the next article).
Why pre market trading?
Pre-market gives a possibility to use strong movements, even before the stock market will have a greater number of traders. What’s important, for me, in pre-market there is only a few or generally speaking there is no – algorithms with which you must fight.
This causes that your only opponent are indeed other traders, rather than machines.
Take a look at the following graph. I marked the movement which took place in premarket hours. Two things should be noted:
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volume even compared to session hours from the day before (note how strongly increased despite the fact that it is pre-market)
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variability in premarket hours, and thus possibility to “catch” a good movement or at least scalps
How it looks like in practice? Below I present one of films, during which I traded in pre-market on VXX.
And its graph, on which I marked the volatility in pre-market, but at the same time very small volume in relation to which is characterized by hours of regular session.
Who to trade in pre market?
It is probably a leading question, if the subject of trading in premarket hours interested you. Above all, possibility to trade in pre-market must be provided by your broker or proptrading company. Otherwise, you will be able to trade only from the opening of regular trading session.
At what hours the pre-market is possible?
Pre-market runs from 4:00 am to 9:30 am, when regular trading session starts.
I divide premarket into 4 phases:
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very early pre-market from 4:00 am to 7 am (at that time I didn’t trade yet – turnover is really small; the second issue – I can’t post orders in these hours).
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7:00 am to 8:00 am – sometimes I trade in these hours, but mainly after stock exchange news or when there is a great volatility on ETN/ETF as VXX, UVXY, SVXY, etc. Up to 8:00 am there are only two ECN: NASDAQ and ARCA – so in the window of quotings there is quite empty
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8:00 am to 9:00-9:15 am – from 8:00 remaining ECNs join, except for the specialist on NYSE. In these hours, usually if there is some interesting movement or interesting setup – I don’t trade the most. After 9:00 am a part of algos joins, that is why I’m less interested in trading then, but I look forward to the opening of session
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9:00-9:15 am to 9:30 am – before the opening of session, there are more available orders on companies; for me above all waiting for opening of the session
What orders it is necessary to use in premarket?
In pre-market, there are ECNs such as e.g. ARCA, NASDAQ, BATS, BYX, EDGX, EDGA. There’s no specialist, it’s differently with smart routers, and dark pools aren’t used.
Level II window in pre-market at 8 am, and between 8 am and 9:30 am:
Does trading in premarket involve a greater risk?
Yes. You must remember about it. There are strong and dynamic movements in pre-market on good volume. But there are also manipulations of rates, which unfortunately you may come across and later unnecessarily to irritate. Therefore, you must keep that in mind.
There is often a wider spread on companies, which may result in definitely greater risk. So I recommend trading at these hours to more experienced traders.
If you just begin, I recommend you to observe what is happening in the pre-market. Only on the basis of observation, you can begin your trading.
Who provides trading in pre-market?
Whom I personally propose as a good solution in trading, which enables to trade in pre-market:
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RemoteDayTraderGroup.com (open a demo account) – that is my proptrading group
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Lightspeed.com (open a demo account) – very good broker
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Interactive Brokers – another very good broker
These are, in my opinion, three best solutions. Of course, online you can find many other offers of brokers. Choose such a solution, which will be the most beneficial for you.
