NEW: Live classes are posted - Click here to see the calendar!

Ep 77: Trading During Pre-Market & After Hours Sessions

March 24th, 2016

Listen to the Podcast

Hey this is Sasha Evdakov, welcome to another episode of let’s talk stocks, episode number 77, and in this week’s episode, what I’d like to do is share with you some insight about trading during pre-market and after-market hours.

I’m going to give you some insight about pre-market, after-market, trading in them, what is it that I do, what I don’t’ do, and that way you just get some insight if you want to trade pre-market or post-market.

In order to do this and show you some examples of what pre-market and post-market is, I’m going to be using the think or swim platform, with TD Ameritrade.

It’s just an easy platform to teach with, because I can make things larger and bigger, normally I do prefer the TC2000 for scanning stocks right here, or you can take a look at it at freestockcharts.com

2016-03-24-recap-final-01.0011

But in general this platform, unless you have the platinum version, I believe, it doesn’t really allow you to see the pre-market and after-market hours, at least not very well.

I’m just going to use the think or swim to demonstrate this, because you can see here in the grey areas of the charting area that you can see that pre-market and after market, so first it’s after-market, and then the day will split, and then it’s pre-market that’s being shown.

2016-03-24-recap-final-01.0015

It just depends on which stock you type in, whether that’s a Netflix, you can see all those little grey areas those are not regular trading time frames .

And if you go into the five minute, you can really start seeing those pre-market and after-market hours.

2016-03-24-recap-final-01.0018

What is pre-market and after-market

First off, what is pre-market, after-market and give you the big picture of do I really trade during those time frames and is it worth it.

Long story short, pre-market and after-market hours are just not regular trading time frames, they are something after the 4 o’ clock bell, and something before the 9:30 opening bell.

You can trade pre-market quite early, I believe anywhere between the 4 am, which is the really early pre-market, but at 6 am, 8:30 am, is really when things start picking up, and you slowly can see that with the clock over here at the bottom.

2016-03-24-recap-final-01.0028

Cons of pre and after market

You can do some research about that, if you really are interested about when exactly it opens, but the thing about pre-market and after-market trading, and I’ll give you some problems that go along with it, is that really the liquidity is light, so you can see that trading right here is very limited, so you won’t be al to trade large positions or large account, if you have a larger account, it’s a little more difficult.

2016-03-24-recap-final-01.0033

The liquidity getting in and out is more difficult, so that becomes a little bit of a problem, and not to mention that because of the weak volume, sometimes you get really bad fill rates, so that’s one of the things, you want to make sure you use limit orders when getting in or out of trades during pre-market or after hours.

Do I do it?

As for me, do I trade pre-market or after-market? No I don’t. I very rarely, if I do, maybe one or two times or trades, I will trade pre-market or after-market hours, and it’s very rare.

The reason for that is usually, most of the time is to get out of positions, rather than to get in positions, and that is simply because I see selling coming in, or I see problems, or I need to really take profits because there’s some news that came out, and if I can get out, I will get out ahead of time rather than waiting for the market to kick in later, taking that stock lower.

Getting clues from the pre-market

For example, take a look at Netflix right here. Let’s just say, what would’ve been a great thing to do here. Let’s just say you had a hard position and you’re ready to get out of the market in Netflix, but you weren’t sure if it was going to pop, and then some news came out right around this time frame, and you started to see this stock is acting weak, and it’s selling off further in the pre-market.

2016-03-24-recap-final-01.0050

And this usually tells you what’s going to happen throughout the day. We’ll talk about that in a little bit. With this pre-market, it tells you, what typically will happen throughout the day and give you some clues and insight.

If you’re in a positions and you’re already at that break where you are ready to get out of that position, and it’s nearly hitting your stop. Rather than waiting for this stock to open up, continue moving lower, blow past your stop, let’s say at $98, then it’s almost better to try and get out during pre-market at $99

2016-03-24-recap-final-01.0055

If you have a stock at $98, rather than waiting for that stock to come down at $97, then you would’ve gotten out at pre-market, and that would’ve allowed you to do that.

That’s one of the helpful things about pre market, and that’s what it allows you to do. And that’s the way I personally use it.

Some people do it very well

I know there are some people and some traders can trade pre-market very well, and that’s really what they make their core business about. They trade pre-market or after-market hours. Because the spreads, or the way that the trading happens is more volatile and that is partly because the liquidity is weaker.

Trading based on the news

If you’re looking for a stock, let’s just say like a price line, you can see what happens here at pre-market, right over here during this day where the terrorist attacks in Brussels here happened, price lines started to sell off.

2016-03-24-recap-final-01.0072

Of course we have this line of resistance right here over head as well coming in, but as you start seeing it sell off right here, if you were quick enough and you read the headlines and news that, oh wow, airline travel is going to be halted, or this stock airline companies are going to take a hit, price line is also probably going to take a hit, and you start seeing this, and you play it off of the news. What you could’ve done is right here, at this little mark right here, right around 8:15 in the morning, if you got up early enough, you could’ve done it at 7:40 in the morning, or 7:15 in the morning, and even earlier, but this does not show that.

But in either case, if you would’ve gotten in right here and shorten some shares at 7:40 in the morning, or even bought some puts, whatever it was, right around 7-8 o’ clock.

Then what happened? The rest of the day, from 725 to 707, that’s about a good 20 point down move that you got in that stock.

Don’t be late

By the time you hit around 9 o’ clock already, the news is already been digested, so if you’re a little late to the party, and you’re already going in at about 725 pre-market, there’s no point, there’s no point and no reason, because look at what happens here shortly.

2016-03-24-recap-final-01.0095

We got a counter trend bounce, and then later, the stock continues to sell off further. So the thing is that already you’re looking at this rubber band, this rubber band that’s already over stretched and over sold, so that’s why you get a counter trend bounce because of the other people that have already been short.

And that’s why if you’re getting into the pre-market around 9 o’ clock In the morning, between 9 and 9:30, there’s almost no reason and no point to trade it.

And the point for that is that you’re getting this bounce, a counter trend bounce, and then you get that continuation pattern, so it’s better than just wait for that bounce and the roll over.

Don’t trade during the first 30 minutes

And that’s one of the reasons why I also say, do no trade the first half hour. Don’t trade the first 30 minutes, because you’ll get that counter trend bounce, and then you’ll get further continuation on the pattern on the movement on that day.

You’ll see you get a bounce, continuation and then sideways move for whatever kind of move you’ll get.

2016-03-24-recap-final-01.0100

And you’ll see that in stocks, it’s one of the reasons why I say watch that first half hour, rather than trading it.

If you know what you’re doing, then by all means you can trade it, but if you’re brand new, if you’re just getting started in the market, there’s no reason to trade that first half hour, because it could just suck you in to only pull that rug out from under you.

And yes, if you understand what you’re doing, you can trade it. So as far as pre-market goes, just like stocks in a regular price movement, whether you look at apple, amazon, Netflix, they get over bought, let’s say over here, over bought, or over here over sold, and then they get a counter trend bounce.

2016-03-24-recap-final-01.0111

Just like stocks have that on a day to day basis, and on a long term weekly charts, you get the same thing that happens, it’s over sold and over bought conditions in pre-market as well.

If you’re coming into the pre-market between 9 and 9:30, I would say you’ve already missed the move, and just wait until digestion happens right around that opening bell at 9:30 to 10 and see how that stock is moving.

If you’re trying to play it right there at 9:15 – 9:25 thinking you’re smarter than the rest of the market, or better, you got another thing coming from you, because most of the time I find most people think they’re going to be ahead of the news, but in reality those things are already accounted for, and people that are really good, people that have access to these news, the knowledge, people that have already been planning this for a while, maybe 8 o clock, 7:30, they get up early to trade that pre market, because they’re experienced, they’ve done this before multiple times.

It doesn’t matter what stock you trade

And it doesn’t matter what stock you’re doing. Whether that’s a price line, whether that’s Alibaba.

You can see right here, you got pre market action over here in this stock right here, sometimes the pre-market will tell you what’s going to happen with those stocks.

2016-03-24-recap-final-01.0125

You can see, here we have a selling. Maybe it was oversold, we got a counter trend bounce, but you see what happens, most people are trying to sell, and then later, you see that selling coming in the next day or two.

And that’s kind of how you can use it as a gage to predict some momentum or action. But unfortunately, it’s not a very strong indicator, and that’s because the volume is weak.

Pre-market doesn’t tell you enough

I’ll give you some insight on what some people are interested in doing. If they’re constantly selling pre-market, then they’re looking to get out of their positions. Typically they’re looking to get out.

If you see constant buying in pre-market, let’s see if Google has it. If you see constant buying in pre-market, and you see it for multiple days, then people are trying to get into positions.

2016-03-24-recap-final-01.0135

It’s just something to look at and evaluate, but unfortunately, it doesn’t tell you enough. Because it’s scattered positions, because there’s not enough volume, there’s not enough data to really get a great gage.

It can give you some clues, sometimes when things are over extended, and if they’re over extended, they’ll bring it back down, because it could be the shorts.

For example, I n this situation, let’s say people were short and they’re covering their positions, and to go back short again. So when you’re short and you’re buying back stock, it makes those prices come back higher right there. It can happen in that way too.

2016-03-24-recap-final-01.0144

Be careful

If you’re trading these pre-market, after market hours, you definitely need to be extra careful, sometimes you will get a little bit higher, a little bit lower prices than what you’re looking for, and it can be an advantage, so for example if you’re looking to just day trade, and you’re trying to catch these lows over here, and then the stock powers higher, that works out on your favor.

2016-03-24-recap-final-01.0148

On the other hand, if you’re trying to day trade and you’re buying it all the way up here, and you’re thinking it’s going to higher prices, then what happens the rest of the day? In fact, it doesn’t work out and it doesn’t happen, in fact the stock goes lower.

I don’t worry about pre-market

For pre market I personally don’t stress about the pre-market, I don’t really watch it, I don’t care too much about it, I care about my personal stocks and what they do on a day to day basis, how they’re moving, how they’re holding up, how they’re behaving, that’s what I care about.

For me this pre-market is nothing but noise, I don’t pay attention to it, I don’t really worry about it. All I care about is what’s the overall market doing, what’s the health of the market, and then I watch my stock throughout the day.

Focus on what’s important

I watch how that stock is moving during the day. So whether that’s a Google, if you’re watching a Google, then you’re watching it, ok, how is it moving today? Not how it did pre-market, but today. And then you watch what happened on the chart.

2016-03-24-recap-final-01.0161

How is the chart holding up? Where is the support? Where is the resistance? Because that’s more important, those things are more critical, because who cares if the premarket bounces around a bit here or there? If the rest of the day the stock powers higher or powers lower. It doesn’t matter.

If you’re looking to nibble off of this pre-market, with just a dollar here or there, I’m not concerned about a dollar, why am I concerned about a dollar? If the move I’m looking for right here, if I’m looking for balance of $85, why am I concerned about a dollar? I would rather wait to see and confirm on a day move, lose $10 on the trade, and get another 60-70 dollar run. That’s what I’m looking at.

For pre-market, I would say, most of the time, you’re watching that, if you’re looking to day trade the stock, or if it’s a news catalyst play, like something like, we talked about with a price line, it’s also another news catalyst that right here with the Brussels terrorist attack it’s actually a perfect example, and one of the reasons why I wanted to talk about the pre-market was right here, because you can see slowly momentum picking up.

2016-03-24-recap-final-01.0178

It gives you a sign right here this little tick right there, stock goes lower again, stock goes lower again at 8:20, so from 7:20, then we go 7:55, and we go 8:15, 8:20, we still continue lower, we get a little bounce, so you would’ve had to be patience and understand that this is counter trend, and then continue selling off further as things develop. And then the next couple of days again we continue moving lower.

That’s one of the things that you kind of can get an advantage on. Is if you’re playing earnings, news catalysts, terrorist attacks, FBA approvals, those kinds of things can give you some added leverage, can give you an advantage to pre market, but if you’re just trading like a regular stock, let’s just say a basic home depot, or a basic Wal-Mart, one stock that doesn’t move that much, these little pre-market blips right here are not going to give you that big of an advantage into the session.

2016-03-24-recap-final-01.0189

A little point here and there won’t move Wal-Mart, it’s up 50 cents today? I mean, it’s not going to be moving that much, these stocks don’t move much, but if you’re talking about volatile stocks, like the price line, sometimes these clues right here, whether that’s after-market or pre-market, they can give you clues.

Pre-market vs. After-market

Which one should you trade more or less if you’re trading pre-market or after-market?

For after-market, I typically use after-market to get out of trades. That’s me personally. But for getting in the trade, if I was to ever do it, I would get in premarket, because the problem is, if you get into a stock after-market, looking to get into it after-market, you still have a full 12 hours or so until that day, the trading day starts to open up. So you need to wait and at that point things can change and develop completely differently, they can turn things around.

Especially if it’s a bad news thing that they report, or some CEO starts tweeting and then things start changing around, so that’s kind of the problem with those.

If you’re getting in after market, it can affect things within 12 hours, so you need to be careful. So for me normally, if I was trading after-market, I normally would get out of positions after-market, which as I said, it’s very rare that I even trade during those times, but that’s why I would do it, I’m just sharing with you my logic of why I don’t do it. And why would I do it, or when I would do it if I did it.

And for pre-market, you’re getting in mostly for those trades that are again, news catalyst news trades, and I would get in trades during pre-market if I wanted to trade premarket. But again, normally I don’t trade pre-market and after-market.

2016-03-24-recap-final-01.0211

And again, there’s a lot of people that do, there’s quite a handful of traders that do, they take advantage of it, because there’s a lot of penny stocks, they will trade them pre-market as well, because they’re looking for inconsistencies, but for me I don’t.

Why don’t I do it?

And why is it that I don’t? Well, the main reason is the volatility. Things are all over the place. They can bounce higher. You can get things at dollar less or a dollar more, you don’t know, so why am I going to worry about that? Why not wait until things are calm, things are moving in a nice stream, I look at the pace I see the pace, why not do it then? For me, that makes it more easy.

The second thing is, let’s just say I want 20 thousand shares of Netflix right here. If I want 20 thousand shares of Netflix, doing it premarket is going to move that stock. You can’t simply do 20 thousand shares of Netflix, you can’t buy 20 thousand shares of Netflix, without moving that stock premarket.

Instead what you would do is you would go ahead and put on a few positions, let’s say two or three thousand or five thousand over in this area, maybe again another 5 thousand in another area, and now you got your five or ten thousand shares right there, and maybe another day you do another ten thousand shares, and now you kind of spread out your risk and distribution.

That’s the accumulation phase, and the same thing happens with Tesla, way back here, this is what happens, is that these companies were buying out shares slowly, up until the point where things exploded.

2016-03-24-recap-final-01.0231

They might buy five thousand shares, then another five thousand shares the next month, anther ten thousand shares, until they accumulated, and then later after a while, they start dumping it, they dump it, they dump it, and that’s what happened.

For that, to do that in pre-market, you just can’t do that, and there’s no point to do that, for what? For that extra dollar? When in fact you’re looking to make $10-$20 on a run? What’s the point?

That’s kind of my personal logic, and I know that other people find pre-market to be very good. And like I said, there is absolutely nothing wrong with trading pre-market, some people make their living trading pre-market, and then selling it during the regular day session.

They’ll by it or sell it pre-market, depending on how pre-market is acting, and if stocks are acting weak, and they see “oh, pre-market is weak, then probably stocks will continue lower”, they will sell it and short it, and then they’ll buy it back during mid-day.

If you do this with let’s say apple right here, so what you may do is, again, you’re looking at, let’s say pre-market or post-market, so right here, you’re looking at right here, this batch from the difference between the after-hours to the pre-hours stocks were higher.

2016-03-24-recap-final-01.0250

After-hours to the pre-market, we had a nice run up here, then stocks looked like they’re continuing to head higher here on apple, so you say “ok, I’m going to buy it”.

Things sold off a little bit, you can hold it, and then you’re out, you’re out for the day, mid-day.

If they continue lower, then what? Where is your stop? and that’s the problem, that’s the issue, that with these inconsistencies, it’s sometimes tough to gage, but if you see that the market is looking for higher prices, then you can probably bet that maybe the rest of the day, it will continue with that energy or that momentum.

And the same thing here. After hours a little bit negative, premarket from between after hours, to the pre-market, it’s a little negative, we had higher prices, then we go lower prices, then the rest of the day probably will get lower prices.

2016-03-24-recap-final-01.0260

Then again, you short it, you buy it back somewhere over here, and you take your profits. And you can do this all day long, and test some strategies and see what works for you and what doesn’t work for you.

Comparing after hours to pre-market hours. So here, again, after hours were a little higher, then we move premarket lower. So we move lower. So if you shorted it right over here, you’re looking for lower prices, then in this situation it wouldn’t have worked out.

2016-03-24-recap-final-01.0265

In this situation we went from higher to kind of lower, then again, if you shorted it, this time if would’ve worked out.

Play with it

You have to kind of play with it, and see what strategies work for you personally, if you’re trading this, as for me personally, as I said, I don’t trade it, I avoid it, I don’t like it. Every now and then I’m kind of forced to do it, or forced to get out of it, maybe due to a news catalyst or a news problem.

Something happens in the news, and then I’m just out, only because I don’t want the risk, and that is why I get out, just because I don’t want to risk, I want to sleep peacefully, and that’s why I get out after hours.

And then maybe I’ll get back in the next day, pretty much at the same point, or a little lower or a little higher, but I don’t want that risk in the stock capping down 10-20 points, or a huge market sell off because of something happening in the real world environment, I’m just trying to hedge or get out of my position.

Sometimes you can hedge with puts and things like that, but it really depends on the stock that you’re trading. Because sometimes options after market hours are not very liquid themselves, so again, sometimes it’s just easier to just get out of the shares or get out of the sock that you’re trading, or at least half of it.

Again, a different way to just look at the risk and manage the risk, but as far as me personally, again, I don’t really trade after market, or pre-market, just because of the inconsistencies that are there.

Find a good strategy

But if you want to do it, by all means, go for it, but you need to do a strategy that works for you, that makes sense for you and I just find that there’s too many inconsistencies that go with it. You just have to find something that you can relate to, and most of the people that trade the pre-market and after-market hours are people that trade based off of the news.

For me, I trade more based off of the technicals, and that’s for me makes the stock move in one direction or the other, whereas the news it’s just trading based on fear and emotion. So I don’t like to trade that way, and that’s why I don’t trade these pre-market and after-market sessions.

Thanks for joining me. I hope this video was a little bit helpful for understanding regarding pre-market, after-market hours and sessions, why I don’t trade them and if you do trade them, kind of give you a little look into what maybe you could do if you’re looking to trade them. But as far as trading pre-market and after-market hours, I don’t really recommend it. Especially if you’re new, but if you do want to trade it, make sure you’re putting in limit orders absolutely, so that way you don’t get burned on your filled orders a little too high or too low one way or the other.

Author: Sasha Evdakov

Sasha is the creator of the Tradersfly and Rise2Learn. He focuses on high-level education speaking at events, writing books, and publishing video courses on business development, internet marketing, finance, and personal growth.

I'm Sasha, an educational entrepreneur and a stock trader. In addition to running my own online businesses, I also enjoy trading stocks and helping the individual investor understand the stock market. Let me share with you some techniques & concepts that I used over the last 10+ years to give you that edge in the market. Learn More

Join over 31,258 regular people who are bettering themselves in the stock market.

Click Here to Sign Up

This is a community that is motivated to learn & improve their skills.
Join us and get free training lessons, freebies, and exclusive promotions.

want some helpful advice?

pay per minute coaching

I am scheduling helpful coaching sessions for people who are interested in real-world advice & guidance where you only pay per session. No long term commitment required.

Learn more
This website and content is for information purposes only as Rise2Learn, TradersFly, and Sasha Evdakov are NOT registered as a securities broker-dealer nor an investment adviser. No information herein is intended as securities brokerage, investment, tax, accounting or legal advice, as an offer or solicitation of an offer to sell or buy, or as an endorsement, recommendation or sponsorship of any company, security or fund. Rise2Learn, TradersFly, and Sasha Evdakov cannot and does not assess, verify or guarantee the adequacy, accuracy or completeness of any information, the suitability or profitability of any particular investment, or the potential value of any investment or informational source. The reader bears responsibility for his/her own investment research and decisions, should seek the advice of a qualified securities professional before making any investment, and investigate and fully understand any and all risks before investing. Rise2Learn, TradersFly, and Sasha Evdakov in no way warrants the solvency, financial condition, or investment advisability of any of the securities mentioned in communications or websites. In addition, Rise2Learn, TradersFly, and Sasha Evdakov accepts no liability whatsoever for any direct or consequential loss arising from any use of this information. This information is not intended to be used as the sole basis of any investment decision, nor should it be construed as advice designed to meet the investment needs of any particular investor. Past performance is not necessarily indicative of future returns.