As a trader, you’ll learn a lot of skills and strategies that you can use to your advantage over the years. Most of the techniques that you put to work to build wealth in your portfolio will involve activities that you do throughout the typical trading day after the opening bell rings at the stock exchange. However, you might also decide that it’s worth getting up early and doing some trading before the market officially opens too.
You may ask, what is premarket trading? It is a technique that many traders avoid, simply because there isn’t as much liquidity available in the trading market when the stock exchange is officially closed. However, how you use the time before the bell rings can be very important to a trader. Here are 3 techniques to consider when you’re looking at the premarket
The Top Techniques for Premarket Trading
Though not all investors will want to start buying and selling stocks before the market opens, as they’d rather avoid the risk that comes with premarket trading, there are a few basic techniques that some people may use. For instance:
- Responding to earnings releases: One of the most common ways to use the premarket is to respond to an earnings release made by a company that you’re investing in. Most companies will deliberately release these documents after the stock market opens or before it closes, to help keep trading changes to a minimum. Even if you don’t trade with this information, you should still read it.
- Understanding economic indicators: In the time before the stock market opens, it’s also important to gather as much information as you can on economic indicators. Stock, forex, commodity futures and more all rely on this information. You may find that the information you gain forces you to act quickly in the premarket.
- Dealing with headline news: Headline news can have a significant impact on any share’s performance. With that in mind, you should definitely catch up on what’s going on within your industries and turn to the premarket if you need to in order to protect your wealth or take advantage of new opportunities.
Choosing your Premarket Strategy
The Premarket can be a convenient place to start trading penny stocks and shares ahead of the crowd if you have information that you need to react to quickly. However, you don’t necessarily have to interact with this environment to get the most out of it. Sometimes, it’s possible to upgrade your trading during the day simply by gathering information and watching how the premarket reacts to the data that you’ve collected.
A lot of leading traders in the world today use the premarket as a source of useful information to guide their investment decisions when the bell rings at the NYSE. You can take the same approach to start figuring out where you want to spend your money early, so you’re ready to jump into action when the official market opens and you don’t have to worry as much about volatility, liquidity limitations, and other complications.