Whether you are new to the world of stock trading or an old pro, learning how to trade premarket is an important skill to learn. This is especially true for people who are interested in futures trading.
During the early morning hours of trading on the eve of the Thanksgiving holiday, the S&P 500 had a good go of it. Most blue chips slid sideways, while others rose on news of a rebound in the economy. In the corporate world, the Big Three banks delivered the goods, while tech stocks sank following news of a downgrade in the rankings. In the retail space, the Kroger-Albertsons merger proved a bust.
It's still early in the day, but the Dow has already lost about 0.5%, tumbling more than 300 points on the news. As we approach the holiday season, investors are gearing up for the big push of shopping. As such, there are many more pending sales than usual, which should help bolster the economy in the short term. On the horizon is the Federal Reserve's latest rate decision, followed by the release of the GDP, which is largely a function of the tax incentives being passed around by the government.
In the end, the S&P 500 managed to make it into the blacks, while the rest of the major US equity markets ended up on the losing end. Nevertheless, the Dow is on a winning streak for the first time in years, a sign that it's a long overdue rebound. As we enter the second quarter of the year, the economy should continue to grow at a healthy pace. Despite this, some are jittery about the possibility of the next rate hike – not to mention the likelihood of another economic downturn.
Originally only available to large institutions, after-hours stock trading has become more accessible to everyday traders. Thanks to advancements in technology, it is now possible for anyone with access to an Electronic Communication Network (ECN) to trade stocks in the after-hours. However, trading after hours can be complicated and risky. It is important to understand the rules and regulations surrounding after hours stock trading before jumping in.
A common misconception about after-hours stock trading is that it is simply a form of gambling. In reality, after-hours trading can be a very beneficial and lucrative activity, particularly for those who are able to follow the news and make a sound, well-thought-out plan.
After-hours stock trading is a great way for investors to capitalize on a market moving event. For example, a company may release earnings reports or announce mergers that will have a big impact on its stock price. These catalysts can lead to significant price changes, and for the right trader, this can mean a big profit. While opportunistic trading can be a smart move for the average investor, it comes with a host of risks. It can also bring major losses if the trade does not go as planned. The first rule to remember about after-hours stock trading is that the more volatile the stock, the higher the risk. This is because the bid-ask spreads can widen. Moreover, the liquidity in the after-hours market is often lower than the regular markets, making it more difficult to execute an order.
Using limit orders to place an order is a good idea. A limit order is a buy or sell order that is priced at a particular price, and will only be executed if the stock reaches that price. If the stock does not meet the price, the order may be cancelled or it may be taken off the table altogether.
Aside from limit orders, traders should also use the right kind of order. For example, a market order must specify the type of exchange to which the order is made, as well as the price. During regular trading hours, brokers can use certain quotes, but in the after-hours market, these quotes are more scarce. If a market order is placed and not filled, the broker may be liable for losing money.
An ECN also makes after-hours trading easier by matching same-price orders. This is done by removing the middleman. This will increase competition and will likely attract larger institutional investors. It will also be easier for companies to fill orders, which could lead to greater profits for shareholders.
An ECN can also help to improve a trader's overall performance. This is especially true if the trader is an individual who is not used to doing this type of trading. Having to make decisions after hours can be confusing and frustrating, and some analysts are known to avoid the market until volume builds up.
Whether you're a day trader or a swing trader, the futures market can offer unique advantages over the equities market. When it comes to futures trading, you can speculate on equity prices, global market movements and upcoming economic events. Unlike the equities market, you can also hedge your position and protect your unrealized profit.
When trading futures, you need to have a strategy. Most traders use a combination of technical and fundamental analysis to formulate a plan. Choosing a trading platform that offers a range of options can help you to monitor the futures markets and implement your strategy. For instance, TD Ameritrade offers thinkorswim, which is a sophisticated and powerful trading platform with a variety of tools to help you make decisions and monitor your trades.
While the futures market is extremely active, there are risks associated with trading. Specifically, traders are exposed to leverage, which can result in large losses. It's also important to understand that the level of liquidity is typically lower outside regular market hours. This makes it more difficult to quickly exit a position. In addition, you should consider the risks of a futures trade before you decide to open a position.
Pre-market stock trading involves trading on electronic markets before the official market opens. This may not be as reliable as regular trading hours because there are fewer transactions occurring. Often, this leads to rapid price changes at the opening bell, which can lead to significant losses for traders with moderate trading styles. For experienced investors, this is an opportunity to purchase shares of a company before the opening. However, it's best to avoid this type of trading because it can be volatile.
Many investors also find that futures contracts can be used to protect their portfolio. If a stock has opened up at a high price, futures can be used to buy or sell that same stock at a lower price. This helps to reduce risk while maximizing potential gains. You can also hedge against future market moves using ETFs or futures-based exchange traded funds.
In the early morning business, the status of pre-market futures is often reported. These reports are based on Form-T trades. This is a type of equities trade that occurs outside normal trading hours, and excludes odd lot trades. In the pre-market, the S&P 500 futures contract is closely followed to gauge market sentiment. When the contract is below the fair value of the index, it indicates that the market is expected to open lower. If the futures are above the fair value, it indicates that the market is expected to rise. It's important to note that the premium between the market futures and the fair value fluctuates throughout the day. If the futures are above the fair price, it's difficult to take advantage of this situation.