If trading days are like horse races, you can think of the opening bell as the opening of the gates. While it's perhaps the most exciting moment, it's hardly the most important part of the ordeal. Premarket scanning allows you to check out the horses and jockeys before the race. While you can't completely predict how the day will turn out, you can get a good sense of which horse – or stock – to back.
Why Start Before Opening
Whether you want to trade futures or get your bearings before the opening bell, scanning pre-market activity can help you accomplish your trading goals. Many futures are available around the clock. However, day traders who like to buy futures often find that trading outside the hours of 9:30 a.m. and 4 p.m. EST can make things easier. Because the markets aren't as busy in these hours, traders find great deals.
Even if you're not interested in futures, you can find significant advantages to scanning for pre-market gainers an hour or two before opening. Often, you can get a sense of which stocks have energy behind them and make a game plan accordingly.
Around 8:30 a.m. EST, you can start looking for indicators that a stock is going to do well. While there are several theories on what level of importance to place on different indicators, there are a few things that many successful day traders scan for. It's important to look at both the big picture and the individual stock.
Before you make a game plan, you should look at any major economic news. These documents usually come out about an hour before markets open, which is great for pre-market scanners. This news could include jobs numbers and other reports. Many investors look at major economic calenders first thing in the morning. Furthermore, you should expect that major news will affect the market as well.
Check the Details
Once you get a sense of the overall economy, it's time to take a look at the individual stocks on your radar. There are several indicators that a stock may be a gainer when the market opens. First, you may take a look at one of the many available gap scanners to see which stocks gained traction since the end of trading the previous day. From there, you can investigate further.
If you're looking for institutional buys, you can find stocks that have one or a few large buys behind that momentum. Otherwise, you should look for those stocks with many smaller buys. You should also pay close attention to momentum in the moments right before opening.
- If you have a live trading account with a broker, it is likely to provide you access to pre-market trading and real-time quotes. Use the broker's internal scanner and news feed (if available) to find pre-market stock gainers.
- If you do not have a live trading account, open a demo account with an established online broker. See how pre-market trading works and how to find stocks that are making moves outside regular market hours.
- Even delayed (not real-time) pre-market data can be useful as it will alert you to which stocks are moving and where to focus your attention.
- During pre-market hours there are fewer traders involved in the market. This can result in erratic moves and misleading information.
Mackenzie Maxwell believes that a well-made budget is a key to a happy household. She starting combining this interest with her passion for writing in 2016. Mackenzie has written for financial sites like The Balance and local financing organizations.