Pre-market trading begins hours before the regular session opens at 9:30 AM. This early morning window offers unique opportunities to react to overnight news and position yourself before most traders are even awake. This guide explains how pre-market trading works and strategies to profit from it.
What is Pre-Market Trading?
Pre-market trading is the period before the regular market session when stocks can be bought and sold through electronic communication networks (ECNs). The pre-market session officially runs from 4:00 AM to 9:30 AM Eastern Time, though most retail brokers only allow trading from 7:00 AM or 8:00 AM.
Key difference: Pre-market trading does not use traditional exchanges like the NYSE. Instead, trades match through ECNs, resulting in lower volume and wider spreads than regular hours.
Pre-Market Trading Hours
- 4:00 AM - 7:00 AM: Early pre-market (limited broker access)
- 7:00 AM - 8:00 AM: Main pre-market (most brokers allow trading)
- 8:00 AM - 9:30 AM: Late pre-market (highest pre-market volume)
Check your broker's specific hours, as they vary by platform.
Why Trade Pre-Market?
Traders use the pre-market session for several strategic purposes:
1. React to Earnings Reports
Many companies release earnings before the market opens. Pre-market trading lets you act on these results immediately rather than waiting for the open when prices may have moved significantly.
Earnings Play Example
Company XYZ reports earnings at 7:00 AM that beat expectations by 20%. The stock gaps up from $100 to $108 in pre-market.
- Opportunity: Buy the gap expecting continuation
- Alternative: Wait for pullback to support and buy
- Risk: Gap could fade when regular trading begins
2. Trade Overnight News
Global events, economic data from other countries, and breaking news happen while the US market is closed. Pre-market trading lets you respond to these events.
3. Establish Positions Before Open
If you have high conviction about how a stock will trade at the open, pre-market lets you build a position before the volatility of the opening bell.
4. Manage Overnight Positions
If you hold overnight positions and news changes your thesis, pre-market gives you a chance to exit before the regular session.
Pre-Market Trading Risks
Pre-market trading carries significant risks that differ from regular hours:
Low Liquidity
Pre-market volume is a fraction of regular session volume. This means:
- Harder to get fills at desired prices
- Larger orders may move the price against you
- Some stocks may have almost no pre-market activity
Wide Spreads
The bid-ask spread in pre-market can be substantial. A stock with a 1-cent spread during regular hours might have a 10-cent or even 50-cent spread in pre-market.
Unpredictable Price Action
Pre-market moves do not always predict regular session direction. Many pre-market gaps fade once the full market opens and more participants enter.
Limit Orders Only
Most brokers require limit orders in pre-market. This protects you from extreme fills but means your orders may not execute.
Warning: Pre-market prices can be misleading. A stock up 5% in pre-market may open flat or even down once regular trading begins. Never assume pre-market direction will continue.
Pre-Market Trading Strategies
Strategy 1: Gap and Go
When a stock gaps significantly on news and shows strong pre-market volume, buy the breakout of the pre-market high expecting continuation.
- Setup: Stock gaps 5%+ on positive catalyst
- Entry: Break of pre-market high with volume
- Stop: Below pre-market support
- Target: 1-2x the morning range
Strategy 2: Pre-Market Range
Identify the pre-market high and low, then trade the breakout at the open:
- Setup: Stock establishes clear pre-market range
- Entry: Buy break above range, short break below
- Stop: Inside the range
- Target: Range projected from breakout point
Pre-Market Range Example
Stock ABC gaps up and trades between $50 and $52 in pre-market.
- Pre-market high: $52.00
- Pre-market low: $50.00
- Range: $2.00
At 9:30 AM: Stock breaks above $52.10
Entry: Buy at $52.15
Stop: $51.50 (inside the range)
Target: $54.00 ($52 + $2 range projection)
Strategy 3: Gap Fade
When a gap seems overdone relative to the news, fade the move expecting reversion:
- Setup: Stock gaps 8%+ on minor news
- Entry: Short when momentum stalls in pre-market
- Stop: Above pre-market high
- Target: 50-75% of gap fill
Pre-Market Trading Tips
- Always use limit orders: Market orders in pre-market are dangerous due to wide spreads.
- Trade liquid stocks only: Stick to high-volume names with active pre-market trading.
- Know the catalyst: Understand why a stock is moving before trading it.
- Size down: Trade smaller positions to account for higher volatility and wider spreads.
- Wait for confirmation: Let the price action develop before committing.
- Set alerts: Set price alerts for key levels rather than constantly watching.
When to Avoid Pre-Market Trading
- Stocks with very low pre-market volume
- No clear catalyst for the move
- Extremely wide bid-ask spreads
- News you do not fully understand
- When you are not fully prepared
Pre-Market vs Regular Session
Consider these differences when deciding whether to trade pre-market:
- Volume: 5-10% of regular session volume
- Spreads: 5-20x wider than regular hours
- Volatility: Higher relative to the volume
- Reliability: Pre-market trends often reverse at open
- Order types: Limited to limit orders at most brokers
Track Your Pre-Market Performance
Pro Trader Dashboard shows how your trades perform across different sessions. Discover if pre-market trading is helping or hurting your overall results.
Summary
Pre-market trading runs from 4:00 AM to 9:30 AM Eastern and offers opportunities to react to earnings, news, and overnight developments. However, the lower liquidity, wider spreads, and unpredictable price action make it riskier than regular hours trading. Use limit orders, trade liquid stocks, understand the catalyst, and size down your positions. Most importantly, remember that pre-market moves do not always continue into the regular session.
Build a complete morning preparation with our guide on pre-market scanning or learn about after hours trading.