Pre-market Trading Strategies

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It is a common saying, “What you do in early in the morning depicts the rest of your day”. So is true in the life of a trader. It is an extremely important task for traders to analyze the pre-market trading stock market even if they don’t intend to trade during those hours. This will help them to master the technique in order to get the best results during the pre-market trading hours or even once the market opens.

In this blog, we will see how can we achieve that.

There are multiple strategies to achieve a high success rate during when you start trading:

1. Earnings release

The traders need to look into the earnings report of a company. The earnings reports usually contains the financial result for a specific period of time by a publicly-traded company. This will give an insight about how well a company is doing. In case a company misses or exceeds the expectations, then that could have positive or negative impact accordingly. Some traders prefer the earning release time.

This will help you to figure out where your competition is risking their assets. For this strategy, it is important to know when is the earning releases are happening.

2. Economic Indicators:

Economic factors have a huge impact on the tradings outcome. You need to consider the macro forces i.e. what factors are moving the market economically and how that could impact the US session.

For example: The Employment Situation Summary, issued by the Bureau of Labor Statistics at 8:30 a.m. EST on the first Friday of every month, is the release with the greatest impact on the market.

There are other economic factors as well such as Gross Domestic Product (GDP), change in employment rate, consumer price index, formation of a business, retail sales, share price and so on.

These usually help in measuring the capital invested and spent by a company. Thus, also preparing a trader before the market opens.

3. Headline news:

Watching a headline news in itself is an art. There are usually two key points to be kept in mind:

  • Scan the financial news.
  • Check for the headlines before trading.

You need to check for the news from a very high visual aspect. This will help in looking for the opportunities to translate your losses into profits. Check for an upgrade and downgrade to get the qualitative and quantitative financial information. This will give you key points to know what will affect your current position in the stock market.

4. E-mini Future Cues:

Futures are a 24-hour trading market. Checking the stocks during pre-market trading hours will give a preview about how the trading will go once the market opens, thus creating a support and resistance for the rest of the trading day. So, check for the index futures.

Some of the U.S. stock market benchmarks that can be looked at are Russell 2000 Index, S&P 500 Index and so on.

5. Watch out for spread:

Another important technique for pre-market trading is to look for the spread i.e. the between the ask and bid prices of stocks. The spread may vary depending upon the demand and supply of the stock products.

Further, since the volume and liquidity are limited during the stock market as we learnt in our previous blog, the spread may be higher than what will be once the market opens.

Thus, the spread in the pre-market trading hours will give you a preview of what the price difference might be during trading hours.

Bottom Line:

The bottom line is that even when you follow all the above strategies, you need to stay calm once you start trading. If you have any losses, think how to revert the situation keeping in mind all the above factors instead of getting distressed. If needed, avoid crowds to stay focused and you will might turn your losses into profits.


Happy Trading!