Updated: Aug 22, 2018 at 9:42AM
Even before the exchanges open, you may be able to buy and sell stock. Image source: Wikipedia.
It is possible to buy stock on the major U.S. exchanges outside of the normal trading day, which runs from 9:30 a.m ET to 4 p.m. ET, in what are known as extended hours trading sessions. The trading session that takes place before the market opens is known as the pre-market session, and many U.S. brokerages allow customers to trade in the pre-market hours -- although the hours, costs, and procedures can vary.
Pre-market trading hours and costs
The exact time window during which you can buy or sell stocks in the pre-market session depends on your broker. For example, Scottrade has a relatively long pre-market trading session that runs from 6 a.m. ET to 9:28 a.m. ET, while TD Ameritrade limits pre-market trading to a 75-minute window between 8 a.m. ET and 9:15 a.m. ET. A few brokerages dont offer pre-market trading at all. The NASDAQ allows pre-market trading as early as 4 a.m. ET, so there are many possible time windows brokerages can offer.
If youre interested in participating in the pre-market trading session, check with your brokerage to find out when you can trade.
The cost and procedure of pre-market trading also varies, depending on the brokerage. Many, such as the aforementioned Scottrade and TD Ameritrade, simply charge their regular commissions for pre-market trades. Others have a special fee schedule, or have a surcharge, like E*TRADE, which charges an additional $0.005 per share for extended-hours trades. Your brokers particular pre-market policy should be available on their website, or by calling their customer service number.
Benefits of trading before the market opens
The main benefit of having access to pre-market trading is the ability to immediately react to news items, such as earnings reports. In general, by the time the normal trading session begins, stocks will have made their reactionary moves and it will be too late to place a trade to ride the earnings reaction.
Risks of trading before the market opens
Its important to point out that there are numerous risks involved with pre-market trading that dont apply to the normal trading session. The main risks include:
- Lower liquidity: There are generally fewer buyers and sellers participating in the extended-hours trading sessions, and therefore it may be tougher to buy and sell shares for a competitive price.
- Higher volatility: There can be greater volatility during the pre-market trading session, especially when news items involving a particular stock are released.
- Wider spreads: Bid/ask spreads can be much higher in the pre-market session.
This isnt an exhaustive list, and if youre thinking of trading in the pre-market session, TD Ameritrade publishes a thorough description (link opens PDF) of the risks involved.
This article is part of The Motley Fools Knowledge Center, which was created based on the collected wisdom of a fantastic community of investors. Wed love to hear your questions, thoughts, and opinions on the Knowledge Center in general or this page in particular. Your input will help us help the world invest, better! Email us at email@example.com. Thanks -- and Fool on!The Motley Fool has a disclosure policy.>
Motley Fool Returns
Stock Advisor S&P 500
Discounted offers are only available to new members. Stock Advisor will renew at the then current list price. Stock Advisor list price is $199 per year.
Stock Advisor launched in February of 2002. Returns as of 08/31/2021.
Cumulative Growth of a $10,000 Investment in Stock Advisor Calculated by Time-Weighted Return
13 Steps to Investing Foolishly
- Change Your Life With One Calculation
- Trade Wisdom for Foolishness
- Treat Every Dollar as an Investment
- Open and Fund Your Accounts
- Avoid the Biggest Mistake Investors Make
- Discover Great Businesses
- Buy Your First Stock
- Cover Your Assets
- Invest Like the Masters
- When should I sell a stock?
- Retire in Style
- Pay It Forward
- Make friends and influence Fools
Tell us about you
Find us at the office
Eastmond- Sukel street no. 62, 79540 Hanga Roa, Easter Island
Give us a ring
+74 201 709 645
Mon - Fri, 9:00-15:00