What is pre-market trading?

Many investors and traders watch the pre-market trading activity to judge the strength and direction of the market in anticipation of the regular trading session. Pre-market trading can only be executed with limited orders through an "electronic market" like an alternative trading system (ATS) or electronic communication network (ECN).

Can a stock be traded in a pre-market session?

Generally, only listed stocks can be traded in the pre-market session. Not all stocks, though. Stocks such as those that have a limited float or are not widely held, or small-cap stocks, may not have sufficient volumes to make pre-market trading a viable proposition. Options cannot be traded in the pre-market session.

Will stock prices move faster during pre-market & after-hours trades?

Stock prices may also move more quickly in this environment. Investors who anticipate trading during these times are strongly advised to use limit orders. Data is delayed at least 15 minutes. Nasdaq.com will report pre-market and after hours trades. Pre-Market trade data will be posted from 4:15 a.m. ET to 7:30 a.m. ET of the following day.

What does a limited trading volume in the pre-market mean?

The limited trading volume in the pre-market may provide a signal of weakness or strength that may not be borne out when the market opens and regular trading volumes are reached. For example, a stock that reports an earnings miss may be down significantly in pre-market trading but could reverse course and end the day higher in the regular session.