What is Premarket Trading? - Benefits & Risks | My Espresso

What is Premarket Trading?

Usually, stock market trades start from 9:30 AM EST and continue up to the night of the same day. Stock market trading doesn't continue 24*7 like other trading markets, which sets it apart from the forex and crypto markets. Many people are unaware of one specific trading style, but several large-scale investors and direct access brokers use this trading strategy to invest in some of the larger stocks. This is what we know as the "pre-market opening trade".

Published on 03 March 2023

Pre-market Trading: Overview

You can understand what a "nifty pre-market trade" is from the name itself. Usually, the market has a short duration, between one and one and a half hours. The market opens at 8 a.m. EST and closes at 9:30 a.m. EST before the regular market opens again.

The pre-market trades and the price action movement can symbolize how the regular market might operate for the rest of the day. Although the predictions might become falsified, the chances are high that the trends are also followed in the regular market.

How does pre-market trade operate?

Before you start accessing the pre-trade opening market, it is crucial to understand how it works. Since the trade market opens before regular business hours, traders and brokers usually have access to the securities listed on Nasdaq and the New York Stock Exchange. Following is a brief illustration of how traders initiate any investment in the pre-market trade.

  • First, you need to choose the order you want to place. You will have two options for the same- market and limit order. Also, you need to choose the number of shares you want to invest in and the type.
  • After this, you can schedule a particular time for executing the order. Usually, you will get three options: regular market, regular and extended hour markets, and the extended hours market.
  • As the liquidity is pretty low during pre-market hours, your placed trade order might not be executed immediately or on the same day. Therefore, you should consider this specific risk without any doubt.

What are the benefits of pre-market trading?

Before you reach any conclusion, knowing more about the benefits of pre-market opening trade will help you understand if investing during these hours can be profitable for you. Considering this, we have discussed how this can be advantageous for you.

1. Usually, the pre-market stocks, bid and ask spreads, and liquidity levels depend on any overnight news from the earlier day. As a result, you can easily know if the next day's regular market can have higher risks of investments or not.

2. Upon investing in the regular trade market, it would be best to have a proper base for speculations. This is why as a pre-market trader, you should utilize the spread and other aspects to know about the regular market liquidity levels, bid-ask spread, price action movements, and several other such aspects.

3. Since liquidity levels are small, traders and brokers can usually deal with higher or more expensive securities. So, if you can make a successful trade, your profits will be huge, which is why dealing with pre-market trade is beneficial.

4. As the regular market starts from 9:30 AM EST, many people cannot access the same due to time crunches and responsibilities. So, accessing pre-market opening trades will be a boon since people won't have to consider any limitations. The market offers way more convenience to the traders, which is one of the primary benefits.

5. Although the market's bid and ask spread is quite large, traders and brokers can easily buy or sell the securities at comparable prices. So, if the previous day's extended hours trades haven't been successful or the price was moving against your speculations, waiting till the pre-market trading hours will prove more beneficial.

Is there any risk associated with pre-market trade?

  • The chances of losses are more, owing to the larger bid and ask spread and the low liquidity levels. Therefore, gaining higher profits can become difficult at times.
  • Also, there is a high chance that your order might not get executed immediately or before 9:30 AM EST.
  • The prices are uncertain, so it is difficult for beginners to make the most of the market.


This article discusses the basic facts of pre-market opening trades, the benefits of investing in such trades, and several other aspects. From this discussion, you will be able to know more about the pre-trade market, its benefits, and others to ensure you can make a well-informed decision concerning your investments. Based on the topics we discussed, do ensure to check your criteria and whether you match them or not.

Chandresh Khona
Team Espresso

We care that you succeed

Bringing readers the latest happenings from the world of Trading and Investments specifically and Finance in general.