Why Do Stock Prices Change Before the Pre-market?

Stock prices change for many reasons, and they can fluctuate greatly when trading volume is high. Oftentimes, prices change during normal trading hours, but these changes can also happen before pre-market hours. So why do stock prices change before the pre-market?

Stock prices change before the pre-market because people can trade at any time of day, including the time before the pre-market. And, sometimes events affect stock prices outside of normal trading hours, while some stocks trade on other markets when the US market is not yet in pre-market hours. 

This article explains what pre-market trading is and the reasons why stock prices change before the pre-market.  Let’s get started.

What Is Pre-market Trading?

First, let’s look at what pre-market trading is before we look at why stock prices change before the pre-market. 

Pre-market trading is any trading that takes place during the period before the market officially opens, which begins at 4 AM. Few people trade during this time, so there are fewer price fluctuations. 

Here is the definition of pre-market trading from Investopedia:

“Pre-market trading is trading that occurs between 4 a.m. and 9:30 a.m. EST. Pre-market trading is characterized by thin liquidity, low trading volumes, and large bid-ask spreads.”

There is also after-hours trading, from 4 PM to 8 PM Eastern time. 

The after-hours trading hours are similar to the pre-market, but they are at the end of the day instead of the beginning. So, we are going over why stock prices change before the pre-market, which is before 4 AM when the pre-market starts. 

Reasons Stock Prices Change Before Pre-market

Stock market trading always affects prices whether the market is open or not. However, some events occur when the market is closed that affect stocks. Also, trading is allowed even when the market is technically closed, so prices can change if people are trading before the pre-market. 

Stock exchanges worldwide are also in normal trading hours when the US market is in the time before the pre-market. I will explain these reasons for the stock price changes below. 

Stock-Affecting Events Occur 24/7

Stock prices change pre-market because sometimes events occur before the pre-market period, making stock prices change. 

Political, business, and other events can affect stock prices, both big and small. But these events don’t wait for the stock market to open before they occur. If something happens before the pre-market, the stock prices will change accordingly. 

For example, if a company or a political figure, like the president, makes a big announcement overnight, the stocks could change before the market actually opens. The stocks can also change pre-market if there is a political or business announcement in other parts of the world. 

Sometimes, when the US is in pre-market or before pre-market hours, a country or business in a different part of the world will make an announcement that affects US stock prices. 

This price change can also occur if there are political conflicts, such as war, or worldwide events, like a pandemic. During these times, the price can increase or decrease depending on the event’s severity and how many people end up buying or selling stock as a result. 

Stocks are more volatile from events like these in the hours before pre-market, so the price changes may be more noticeable and larger during this time. 

Trading between Pre- and After-Market Hours

Trading still happens between the pre-and after-market hours, and any trades during this time, especially if there is a significant volume, will affect stock prices. 

Between the after-hours and the pre-market, which is from 8 PM to 4 AM, traders can still buy and sell stocks on some platforms like TD Ameritrade. The platform actually lets people trade stock 24 hours a day, five days a week. These hours exclude weekends and market holidays. 

So, the trading is available from Sundays at 8 PM Eastern to Friday at 8 PM. 

As mentioned, events or announcements that affect trading can occur anytime. With 24/5 trading, traders can respond to these events in real-time instead of waiting until the market or pre-market officially opens. 

Trading in off-market hours is when stock prices are subject to higher volatility, so price changes may seem drastic during these times. But, there is also a lower volume of people trading before pre-market hours, so there are not always huge price changes during these times. 

Furthermore, not all stocks are available to trade before the pre-market. TD Ameritrade only offers a couple of dozen securities that are available for 24/5 trading, but they are a wide range of options. 

So, because people can trade in the off hours before the pre-market, stock prices are susceptible to change at any time. But, not all price changes are because of this, as only certain stocks trade during this period. 

More Helpfull resourges:

• https://noasnoas-socialtrading.com/can-you-make-trading-a-full-time-career/
• https://noasnoas-socialtrading.com/is-a-pip-and-bps-the-same-thing-what-you-need-to-know/
• https://noasnoas-socialtrading.com/does-warren-buffett-take-notes-when-he-reads/
• https://noasnoas-socialtrading.com/why-does-warren-buffett-read-so-much/
• https://noasnoas-socialtrading.com/trading-books-you-need-to-read/

Not All Stocks Trade on Eastern Time

Stock prices also change before the pre-market because not all stocks trade during the traditional hours of 8 AM to 4 PM Eastern time. The normal trading hours in some markets are the same as pre-market hours in the United States because of time changes.

For example, here are some of the stock markets around the world and when they trade during the United States Eastern time:

• Shanghai Stock Exchange: 9:30 to 11:30 PM and 1 to 3 AM
• Johannesburg Stock Exchange: 3 to 11 AM
• London Stock Exchange: 3 to 7 AM and 7:02 to 11:30 AM

These times cover before the US stock markets’ pre-market hours, but they are trading during their normal hours, which is why you will see the prices change. So, you may think prices are changing pre-market, but they are actually trading during normal hours on their market. 

Final Thoughts

Stock prices can change at any time, including before pre-market. People trade at all times, and some markets are open around the world when the ones in the US are in pre-or before pre-market hours. There are also events that affect stock prices that can occur at any time, even before pre-market, and affect stock prices. 

Sources

• Investopedia: When do Stock Market Exchanges Close
• Investopedia: Premarket
• TD Ameritrade: After Hours Trading