Should You Trade Stocks Before Market Opens (Premarket Movers)?

Today we’re gonna talk about the big pre-market movers. They can be profitable but they can also be very, very dangerous. So there’s a lot of things you should know.

Today we’re gonna talk about pre-market movers.

Have you traded pre-market?
Have you done well?
Let me know, yes or no in the comments below.

So a lot of new traders kind of get enamored with pre-market. Let me kind of layout some terms before we get started. 4:00 a.m. Eastern is when NASDAQ and NYSE stocks start trading.

Now normally there isn’t much liquidity that early but stocks can trade at 4:00 a.m. And pre-market is from that period, 4:00 a.m. until the market open at 9:30 a.m. So you’ve got a lot of time there.

What is that? Five and half hours.

And many traders will see stocks up big and think wow, maybe I could make a couple hundred bucks before I go to work.

Pre-market trading can be done successfully but I wanna talk about a lot of the dangers and why I would recommend kind of cautiously wading into it. The biggest thing you will see and this is why you wanna use your StocksToTrade screeners is focus on liquid stocks.

Focus on Liquid Stocks

Often four, five, six, seven, 8:00 AM, stocks might be up 20, 30, 40% but they might be only moving on, I mean literally a couple 100 shares. And that is something you should avoid, avoid, avoid. You need liquid stocks because not only do you need to be able to buy the stock, you need to be able to exit.

If you’re a buyer, you need a seller and when you’re selling, you need a buyer. And if a stock is only trading a few 100, maybe a few 1000 shares, maybe 10,000 shares, there isn’t enough liquidity to get in and out of that stock in a timely fashion.

And what can happen, I call it trading against yourself. Because if you’re in one of these illiquid stocks, you could have a green profit. But if you go to sell your stock, if there’s no bidder,if there’s nobody bidding that stock, you may have to sell 20, 40, 50 cents lower than you originally intended because you’ve gotta keep lowering your offer until you get a bidder that steps in. That is the biggest reason to avoid pre-market liquidity.

Second thing is many times these stocks are moving on news that nobody has actually taken the time to interpret.

Many, many traders do very well by shorting these big movers in pre-market because often whether it be algorithms or uninformed traders, people just start buying the stock because there’s a new headline.

Hopefully you don’t do that. I talk about it in a lot of these article. Digest the news. Don’t get bitten by FOMO, the fear of missing out. Just ’cause there’s a new headline with a buzz wording title does not mean you should just be clicking buy before you even have a chance to digest the news.

And that’s what we see in pre-market. Especially we call it the 8:00 a.m. rush in stock trading, day trading circles. Many brokers accounts might not let you trade until 8:00 a.m.

A lot of these stocks know that and they will time their press releases for exactly 8:00 a.m. to get everybody to rush in and buy all of their stock. So avoid pre-market trading unless you feel comfortable digesting the news, you think it’s a justified move, but don’t just click buy, buy, buy because you see a new headline.

The other thing to avoid is just let the market digest the stock.

You can’t beat the market. You can only react. One of my favorite trade setups is we call it that kind of dip and rip idea in StocksToTrade Pro. You’ll see these stocks that spike quickly then you get the early profit takers around the market open then the stock can stabilize and then re-trend towards the high of the day.

That’s that 9:45 a.m. window. We love for those high of day reclaims we call them. So the biggest thing is, look for that pattern. Let everyone else chase the stock. Let everyone else blindly click buy. Your idea is you wanted to make an informed decision.

Avoid illiquid stocks. And if you don’t have time to digest the news, don’t rush into a trade. It will only lead to losses. Be informed, take your time, do not get stricken by the fear of missing out.

Thanks for reading our article. Also share with your friends. And if you’re looking to expand your trading knowledge, don’t forget to check out all of our other article.