Premarket trading is the buying and selling of U.S. stocks before regular market hours. To trade premarket, use a brokerage account that supports extended-hours trading, enable the premarket session, choose an eligible stock and submit a limit order with the correct extended-hours setting.
Nasdaq's premarket session runs from 4:00 a.m. to 9:30 a.m. Eastern Time, but some brokers provide access only during part of that window. Premarket trading can help you respond to earnings, economic data and overnight news before the regular session opens. It also involves lower liquidity, wider spreads and sharper price moves than regular trading.
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Premarket Trading at a Glance
| Feature | Premarket details |
|---|---|
| Nasdaq premarket hours | 4:00 a.m. to 9:30 a.m. Eastern Time |
| Regular market hours | 9:30 a.m. to 4:00 p.m. Eastern Time |
| Main order type to use | Limit order |
| Who can trade | Investors with a broker that offers extended-hours access |
| Main risks | Low liquidity, wider spreads, partial fills, volatility and price gaps |
| Stocks available | Depends on the brokerage and trading venue |
| Options availability | Most stock options do not trade in extended hours, with limited exceptions |
Nasdaq's premarket session begins at 4:00 a.m. Eastern Time. Some brokers restrict retail access to later hours, such as 7:00 a.m. to 9:30 a.m. Eastern Time. Your broker's schedule determines when you can place and execute trades.
How to Trade Premarket
Step 1: Choose a Broker That Supports Premarket Trading
Your broker must offer extended-hours trading for the specific stock you want to trade. Check the following before placing an order:
- The broker's premarket hours
- Whether the stock is eligible
- Whether the broker accepts only limit orders
- Whether fractional shares are available
- Whether the order expires at the end of the premarket session
- Whether an unfilled order carries into regular market hours
- Whether the broker charges extra fees or applies other restrictions
Broker policies differ. Some firms limit extended-hours trading to certain securities, trading venues or order types. Many brokers also require customers to accept an extended-hours risk disclosure before trading.
Step 2: Find a Stock With a Clear Premarket Catalyst
Premarket volume often increases when a company releases information that changes investor expectations. Common catalysts include:
- Quarterly earnings
- Revenue or profit guidance
- SEC filings
- FDA or other regulatory decisions
- Merger announcements
- Analyst rating changes
- Economic reports
- Major company news
- A large overnight move in a related market
Do not trade a stock only because it is up or down sharply. Find out why it moved and check whether the move has meaningful volume behind it.
Use this checklist:
- Read the company's news release or filing.
- Compare the premarket price with the previous regular-session close.
- Check premarket volume.
- Review the bid-ask spread.
- Mark the previous day's high and low.
- Identify nearby support and resistance levels.
- Decide where the trade idea becomes invalid.
Step 3: Use a Limit Order
A limit order sets the worst price you are willing to accept.
- A buy limit order executes only at your limit price or lower.
- A sell limit order executes only at your limit price or higher.
Suppose a stock shows a bid of $24.80 and an ask of $25.10. A buy limit order at $24.95 will not fill above $24.95. It may fill partially, fill later or remain unfilled.
Limit orders are generally more suitable for premarket trading because prices can move quickly and the displayed price can change before a market order executes. FINRA explains that limit orders give investors control over price, while market orders may execute at a materially different price during fast-moving conditions.
Step 4: Enable the Extended-Hours Setting
Trading platforms may label the setting as:
- Extended hours
- Premarket
- Outside regular market hours
- Allow order to execute during extended session
Select the setting before submitting the order. A regular-session order may not execute during premarket unless extended-hours eligibility is enabled.
Check the order's time in force as well:
- Day order: Usually expires at the end of the broker's trading day.
- Extended-hours day order: May remain active only during the permitted extended session.
- Good 'til canceled: May remain active beyond the current session, depending on the broker.
Do not assume that an unfilled premarket order will remain active at 9:30 a.m. Eastern Time. Some brokers cancel these orders. Others transfer them to the regular session under different conditions.
Step 5: Check the Bid, Ask and Liquidity
The bid is the highest displayed price buyers are offering. The ask is the lowest displayed price sellers are requesting. The difference between them is the bid-ask spread.
A wide spread raises the cost of entering and exiting a trade. Low premarket liquidity can also lead to:
- Partial fills
- No fill
- Sudden price jumps
- Slippage
- Difficulty closing a position
The last traded price is not necessarily the price at which you can buy or sell. The current bid and ask are more relevant to immediate execution.
FINRA warns that extended-hours trading generally has fewer market participants, greater volatility and a higher risk of an inferior or partial fill.
Step 6: Define Your Risk Before Entering
Decide three things before placing the trade:
- Entry price: The maximum price you will pay or the minimum price you will accept.
- Invalidation level: The price or event that shows your trade idea is wrong.
- Maximum dollar loss: The amount you are prepared to lose.
A simple position-sizing formula is:
Position size = Maximum dollar risk ÷ Risk per share
If your maximum planned loss is $100 and your planned risk is $0.50 per share, your position size is 200 shares before commissions, fees and slippage.
Premarket prices can change sharply when regular trading begins. A stock trading at $30 before the open may start the regular session at a different price as more buyers, sellers and trading venues enter the market. Extended-hours prices do not establish the official closing price or guarantee the next day's opening price.
Premarket Trading Strategies
Trading a News Gap
A stock may gap higher or lower after earnings or company news. Traders may look for:
- Continuation in the direction of the news
- A pullback toward a key price level
- Failure of the initial move
- A breakout above the premarket high
- A breakdown below the premarket low
The initial move may reverse when regular-session volume arrives, especially if relatively few shares created the premarket move.
Trading the Premarket Range
Some traders mark the premarket high and low, then wait for regular-session trading to break one of those levels. This avoids entering during the least liquid part of the move, but it requires waiting for confirmation after 9:30 a.m. Eastern Time.
Waiting for the Regular Market Open
Premarket trading is optional. Waiting until regular hours can provide:
- More liquidity
- Tighter spreads
- More visible price discovery
- More consistent execution
- Access to a wider range of order types
The trade-off is that the stock may move before you enter.
Premarket Risks to Understand
The Displayed Price May Not Reflect the Best Available Price
Extended-hours markets are not linked in the same way as the regular market. The price shown on one trading system may not reflect the best available price on another. The National Best Bid and Offer requirement does not apply during extended hours in the same way it applies during regular trading hours.
Premarket Volume Can Be Misleading
A stock may appear to be moving strongly even though relatively few shares have traded. A larger order can move the price or fail to execute.
The Opening Price Can Reverse the Premarket Move
A stock that rises before the open can sell off after 9:30 a.m. Eastern Time. A stock that falls before the open can recover when regular-session traders respond to the news.
Stop Orders May Not Work as Expected
Stop-order availability and extended-hours rules vary by broker. A stop may not trigger during premarket, may be unavailable or may execute at a price well away from the stop level during a fast move. Check your broker's rules before relying on one.
Most Options Are Unavailable
Most stock options do not trade during premarket hours. FINRA states that only a limited number of options contracts currently have extended-hours availability.
A Premarket Trading Routine
Use this checklist before each trade:
- Identify the company's catalyst.
- Confirm that your broker supports the stock during premarket.
- Review the bid, ask and spread.
- Compare the current price with the previous close.
- Mark the premarket high, low and other relevant price levels.
- Set a maximum dollar loss.
- Choose a limit order.
- Confirm the extended-hours setting.
- Check when the order expires.
- Cancel the trade if the original reason for entering no longer applies.
Is Premarket Trading Suitable for Beginners?
Premarket trading is usually unsuitable for beginners who have not learned order types, position sizing and risk control. The regular session generally offers deeper liquidity and more consistent execution.
A safer progression is:
- Study premarket movers without trading them.
- Use a simulated account to practise limit orders.
- Trade small positions.
- Avoid wide spreads and thinly traded stocks.
- Compare premarket behavior with the regular-session open.
- Record every trade and the reason for entering.
Use a limit order, trade only when you understand the catalyst, keep the position small and assume that the 9:30 a.m. open can change the setup.