Pre-Market Trading and Why It’s Important

PRE-MARKET TRADING It is a session of trading activity that occurs before the regular market session, generally between 8:00 - 9:30 A.M. EST each trading day. Pre-market trading activity provides a great indicator of the strength and direction of the market heading Into the regular trading session. Forces outside of the regular trading session drive pre-market price volatility. Therefore, knowing how to trade stocks and futures during this period is a major profit opportunity for savvy investors. AM 9 AM 10 AM 11 AM NOON 1 PM 2 PM 3 PM 4 PM 5 PM 6 PM 7 PM 8 PM REGULAR TRADING HOURS AFTER-HOURS TRADING FACTORS DRIVING PRE- MARKET PRICE VOLATILITY ECONOMIC INDICATORS A plece of economic data, usually of macroeconomic scale, that is used by Investors to interpret current or future investment possibilities and judge the overall health of an economy. Some include: (p) The Consumer Price Index (CPI) V The price of crude oil v Gross Domestic Product (GDP) V Retall Sales v Unemployment figures v Weekly Jobless Claims Market reaction to this data can cause substantial price moves and set the trading tone for the day 8:00 AM 8:30 AM 9:00 AM 9:30 AM 10:00 AM 10:30 AM 11:00 AM Most economic releases are issued at 8:30am EST, an hour before the New York open. HIGH IMPACT INFO The U.S. Employment Report, issued by the Bureau of Labor Statistics on the first Friday of every month at 8:30am EST, is the release with the highest impact on the market. PRICE VALUE Usually, the biggest market moves occur when the number far FORECASTED exceeds or misses the expected forecast, creating high volatility and the trading risks and opportunities that accompany it. REAL EARNINGS RELEASES ....... Earnings season refers to the FEB MARCH period one or two weeks after the end of each quarter, In which .... publicly traded companies MAY JUNE AUGUST release their quarterly earnings reports. Most companles release their earnings in early to miad ....... SEPT NOV DEC January, April, July and October. Earnings are released before the market open and after the close, causing substantial price moves in the underlying stocks, outside regular trading hours. Large reactions typically occur when a company substantially exceeds or misses expectations. Z AM 8 AM 9 AM 10 AM 11AM NOON 4 PM 5 PM 6 PM Z PM 1) Having access to extended-hours trading will allow the stock trader to react and participate in the initial reaction to news for the underlying stock. MAJOR NEWS EVENTS Wars and natural disasters can take the market by surprise at any time. (P) News and announcements of major geopolitical events are often reported after regular trading hours or over the weekend, potentially causing massive market moves. AM 9 AM 10 AM 11AM 4 PM 5 PM 6 PM Z PM Access to the market before the market open allows investors to better position themselves and hedge agalnst risk in case of such events. ELECTRONIC COMMUNICATIONS NETWORKS ECNS provide a ECNS are electronic Major brokerage firms means for investors trading systems and individual traders to participate in that automatically can trade among extended hours match buy and sell themselves without a trading. orders at specified middleman such as prices an exchange market maker CONCLUSION The advent of electronic markets has made trading outside market hours increasingly accessible to retall traders and even small Investors. From getting a feel for how the market will open, to wider trading opportunities, following market action outside regular trading hours opens up a slew of new possibilities. TU TIMOTHYSYKES.COM SOURCES http://www.investopedia.com/artieles/investing/050212/activities-you-can-take-advantage-premarket-and-afterhoure-trading-seseions.aep http://www.investopedia.com/terms/p/premarket.asp