Three tips for Pre market Trading and Routine

The U.S. markets open at 9:30 EST however; some stock traders begin their trading day at the open of the pre-market beginning at 8:00 EST. One of the most important factors to consider when day trading in pre-market hours is there may often times be less volume than during regular stock market hours. This means, in general terms, there will be added risk to the trade because of the lack of volume. Be certain to use limit orders during pre-market stock trading since the spread is usually large at that time.

A stock trader’s pre-market routine is important to their success as a day trader. A pre-market strategy or routine helps the stock trader find different trading opportunities and gives them time to plan their day. This is so the stock trader is not spending time during market hours making new plans but able to focus on stock trading.  Stock traders also use pre-market hours to prepare for the trading day in general. The following is a list of four tips to a pre market routine:

•    Check previous day’s trading action
•    Review stock market news
•    Create a stock watch list

It is important to look at stock charts and review the trading action of the previous day. Noting this information gives the stock trader a better idea, in general, of what the general trend of the stock may be. This practice also helps one determine, not predict, what direction the stock may be inclined to follow during the current trading day. As already mentioned, this is not a prediction, only a forecast. This will help the stock trader decide how to trade a particular stock especially during premarket trading.

It is also a good idea to check the news related to any individual stock that has had drastic moves in either direction. If the move is news driven the stock trader will know how to handle the stock. After checking news related to individual stocks, it is a good practice to check the news of the overall market and get a feel for what the markets may offer during the trading day. Remember, the tone of the market can change at any moment so be prepared to move with it in whatever direction it decides to move.  Also, when reviewing the news, pay attention to specific events taking place on individual stocks such as analyst upgrades or downgrades, earnings reports, and FDA approvals or disapprovals.
Finally, the stock trader will make a list, also called a watch list, of different stocks they will monitor and possibly trade throughout the trading day. Stocks on a watch list usually have a high probability of presenting a profitable trade at some point during the trading day. This proves to be a highly successful routine as the stock trader has their research sitting in front of them instead of making highly emotional decisions during peak stock trading hours.

Implementing this practice of checking the previous day’s trading action, reviewing stock market and individual stock news, and creating a plan of action, or watch list, during pre-market hours makes it highly probable the stock trader will have more success. It is a good time to plan the day ahead and possibly make a few stock trades, depending on volatility before the stock market hours begin.  For more on premarket trading and other trading educational tools, check us out at www.tradestocksamerica.com