what is pre market trading 
pre market trading is the period of trading activity that occurs before the regular market session the pre market trading session typically occurs between 8 a m and 9 30 a m est each trading day many investors and traders watch the pre market trading activity to judge the strength and direction of the market in anticipation of the regular trading session pre market trading can only be executed with limited orders through an electronic market like an alternative trading system ats or electronic communication network ecn market makers are not permitted to execute orders until the 9 30 a m est opening bell 1understanding pre market tradingpre market trading activity generally has limited volume and liquidity therefore large bid ask spreads are common 1 many retail brokers offer pre market trading but may limit the types of orders that can be made during the pre market period several direct access brokers allow access to pre market trading to commence as early as 4 a m est from monday through friday it is important to remember there is very little activity for most stocks so early in the morning unless there is news the liquidity is also extremely thin with most stocks only showing stub quotes index based exchange traded funds etfs such as the spdr s p 500 etf spy have moving quotes due to the trading in the s p 500 futures contracts many of the most widely held top holdings in benchmark indices may also get movement in the event of a significant gap up or down in the s p 500 futures large cap widely held stocks such as apple inc aapl tend to get trades as early as 4 15 a m est 2after hours trading was introduced before pre market trading the new york stock exchange nyse introduced after hours trading in june 1991 by extending trading hours by an hour the move was a response to increased competition from international exchanges in london and tokyo and private exchanges which offered more hours of trading and 2 24 million shares changed hands in two sessions of trading 3 over the years as exchanges became increasingly computerized and the internet s reach spread across borders nyse began extending the number of hours of trading available for trading eventually allowing pre market trading between the hours of 4 a m and 9 30 a m 4pre market trading benefitspre market trading and after hours trading collectively known as extended hours trading share similar benefits and risks let s look at the benefits first pre market trading riskswe now turn to the risks of pre market trading which include these risks mean that only experienced traders should consider trading in the pre market because the odds are stacked against retail traders seasoned traders have the knowledge and experience to gauge the many nuances that make trading a challenge such as assessing whether the pre market reaction to the news is an under reaction or over reaction and taking decisive action on trading matters like opening a new stock position or closing an existing one setting limit prices at certain levels for buys and sells etc 