Although the US market opens at 9:30 AM EST for the regular trading session, you can still buy and sell stocks before the official regular trading session begins. This is called 'pre-market' trading or 'extended hours' trading.
SelfWealth offer trading of US securities during both the pre-market and regular trading sessions.
When can I place an order in the US pre-market?
Pre-market trading for the US market takes place from 7:00 AM to 9:30 AM EST.
SelfWealth will start accepting pre-market orders for the next trading day after the market closes (4:00 PM EST). The system will keep these orders at a pending order state until the Pre-market session starts on the following trading day.
Are there any benefits to pre-market trading?
A major benefit of this type of trading is it allows you to react to news and announcements that may cause big swings in prices, producing significant price gaps from when the market last closed. Pre-market trading allows you to place trades immediately to manage your positions without having to wait until the Regular trading session begins.
You can find more information on how to place an order in the US pre-market session by clicking this link.
Are there any risks associated with pre-market trading?
You should consider the following points before engaging in pre-market or extended hours trading with SelfWealth:
Risk of Lower Liquidity
Liquidity refers to the ability of market participants to buy and sell securities. Generally, the more orders that are available in a market, the greater the liquidity. Liquidity is important because with greater liquidity it is easier for investors to buy and sell securities, and as a result, investors are more likely to pay or receive a competitive price for securities purchased or sold. There may be lower liquidity in extended-hours trading as compared to regular trading hours. As a result, your order may only be partially executed, or not at all.
Risk of Higher Volatility
Volatility refers to the changes in price that securities undergo when trading. Generally, the higher the volatility of a security, the greater its price swings. There may be greater volatility in extended-hours trading than in regular trading hours. As a result, your order may only be partially executed, or not at all, or you may receive an inferior price when engaging in extended-hours trading than you would during regular trading hours.
Risk of Changing Prices
The prices of securities traded in extended-hours trading may not reflect the prices either at the end of regular trading hours or upon the opening the next morning. As a result, you may receive an inferior price when engaging in extended-hours trading than you would during regular trading hours.
Risk of Unlinked Markets
Depending on the extended hours trading system or the time of day, the prices displayed on a particular extended-hours trading system may not reflect the prices in other concurrently operating extended-hours trading systems dealing in the same securities. Accordingly, you may receive an inferior price in one extended-hours trading system than you would in another extended-hours trading system.
Risk of News Announcements
Normally, issuers make news announcements that may affect the price of their securities after regular trading hours. Similarly, important financial information is frequently announced outside of regular trading hours. In extended-hours trading, these announcements may occur during trading, and if combined with lower liquidity and higher volatility, may cause an exaggerated and unsustainable effect on the price of the security.
Risk of Wider Spreads
The spread refers to the difference in price between what you can buy a security for and what you can sell it for. Lower liquidity and higher volatility in extended-hours trading may result in wider than normal spreads for a particular security.