Pre-market trading has become popular with online traders over the last several years. Pre-market trading allows investors to trade stocks before the regular trading session begins. Before embarking in pre-market trading, you should understand how it works and the risks involved.

Regular Trading Hours

The regular trading hours for the major stock exchanges in the United States are 9:30 a.m to 4:00 p.m. Eastern Time.

Pre-Market Trading Hours

Pre-market trading hours are from 4:00 a.m. to 9:30 a.m. Eastern Time. Stock brokers can limit the hours that they allow their clients to trade in the pre-market session. Many brokers allow their clients to trade in the pre-market from only 8:00 a.m. to 9:30 a.m. Eastern Time.

Trading Restrictions

Traders can place limit orders only during pre-market trading hours. Thus, a trader must specify the most he is willing to pay when buying a stock and the least he will accept when selling. If a counter-party is not found for a trade and the trade is not executed during the pre-market session, the trade will be canceled. Unexecuted pre-market trades do not carry over to the regular trading session.

Risks

Trading during pre-market hours can be very light. This may lead to large fluctuations in a stock's price. Also, the spread between the bid price and the ask price might be large, which is typically a disadvantage to traders.

Pre-Market Stock Quotes

Many financial websites now offer pre-market stock quotes. Yahoo! Finance and Google Finance are two of the most popular sites that offer pre-market quotes. Many brokerage firms also off their clients pre-market quotes through their websites.

After Hours Trading

In addition to pre-market trading, the stock exchanges offer after-hours trading, which occurs from 4:00 p.m to 8:00 p.m. Eastern Time.

Source:

NASDAQ: Understanding Pre-Market and After-Hours Stock Trading

Securities and Exchange Commission: After-Hours Trading: Understanding the Risks

More Information:

Yahoo! Finance

Google Finance