What Is Pre-Market Trading?

Many US exchanges and electronic trading systems accept and match orders before the regular session opens and after it closes. These periods are called pre-market and after-hours trading or, together, extended-hours trading. Which stocks trade, at what times and through which brokers depends on the venue and on the brokerage firm, so the hours and the available products differ from one investor to another.

Participation is lower than in the regular session. The investor bulletin on after-hours trading from the US Securities and Exchange Commission lists the usual differences: less liquidity and trading interest, wider spreads between the bid and the ask, larger price swings in stocks with limited activity and different order-handling rules, with many firms accepting only limit orders. A price printed in extended hours can therefore move more on small quantities than a regular-session price.

The official daily open, high, low and close of an exchange are normally based on the regular session, and extended-hours trades are reported separately. News released outside regular hours, such as company results, is one reason why extended-hours activity occurs. A pre-market price indicates interest during that period; it does not fix where the regular session will open.