6 Tips to Help You Trade the Premarket

The premarket is a scary place.

Or at least that's what someone might tell you if they don't understand how it works.

In reality though, the premarket is just like any other time to trade.

And if you want to make money before the opening bell, you can use the same exact rules we follow during the regular session to execute your trades and make a day's pay before the day even begins.

But as you probably know, there are some major differences between the pre-market and the regular trading day.

So today I wanted to go over some helpful tips that you can use to get started...

1. Trade Stocks That Have High Volume

When we day trade, we use the VWAP to guide our entries.

And the biggest thing you need to do is find a stock that is trading with heavy volume.

Often times you can just tell by looking at the chart itself.

Here's an example of a stock chart that I would never consider trading...

You see all of those grey dashes? That means that there's barely anyone out there that cares about this stock.

Those are individual orders going through to buy a couple hundred shares at a time.

And if you notice, the orders aren't going through every minute.

There's an order that goes through every couple minutes or so.

And at one point, there was a 12-minute gap before someone snatched up any shares.

This isn't to say that I'll never trade WBA. But this morning it had no volume, so I didn't care at all about it.

On the other hand, look at what happened with FRC this morning...

Trading on the stock started at 4:00 am ET and already the stock was moving.

It broke VWAP at 5:30 am, never wanted to break back down and then shot up to highs for the day.

If you had stumbled in at 8:00 am and wanted to try for a bullish trade, a 14.40 entry would have gotten you to a high of 14.98

Not bad for 30 minutes of work before 9:00 am.

2. Never Trade After the Markets Close

You may have read that headline and said But Kenny, I thought you said we should trade the premarket.

And you'd be right.

But you really only want to try and trade BEFORE the market opens. And not AFTER the 4 pm bell rings.

The postmarket after 4 pm is often more difficult to trade because it just doesn't have as much volume.

Don't ask me why, but traders and algorithms just like trading before the bell opens rather than after it closes.

Plus, you don't want to be trading all night do you?

Go and enjoy the world out there. As a trader your day should be done and over by 4 pm, if not sooner.

If you trade and make your day's pay before 9:30 am, then you can kick your feet up and relax without any worries.

3. Always Sell Your Position Before the Opening Bell

If you get into a position before 9:30 am, I want you to promise me to get the heck out of it by 9:25.

Listen, you can always get in after the opening bell.

But that first candle is often WILD.

You have no idea the market will make a stock go up or down.

We're not here for predicting the future.

We see what price tells us, we have our setup, we get in and we get out.

You need to be quick if you trade the opening bell.

And if you aren't, your winning trade will get chopped up and you'll come out a loser.

4. There are No Stops in the Premarket

When you put on any trade, you always define your risk.

A lot of times I'll tell you to put two stops to get out of your position.

But when it comes to the premarket, there is no such thing as a stop.

You'll have to stalk your trade, and if it breaks your levels, you need to manually get out.

If you try and set a stop in the pre-market, often times it'll just sell your position and close your trade for a loss.

5. Test Out How to Trade the Premarket with Your Own Platform

Often times when you place an order to buy in the premarket, you'll need to change what's called the Time in Force or TIF on your platform.

On Think or Swim for instance, you'll change the default "DAY" to "EXT" which stands for extended hours.

If you don't do this, your trades will not execute and you could miss a profitable opportunity.

Every platform is different, and every broker has a different way of how they work.

Most brokers allow you to trade by 8 am every day. But some will let you go earlier.

You just need to test out what your account can do.

And if you don't have premarket authorization or need to get walked through how to trade the premarket, I recommend you call your broker directly for assistance.

6. The Premarket Will Often Mimic the Real Trading Day

Remember what I said on Tuesday...

The levels defined by the premarket will set you up for later.

And if during the day session, these levels are broken...

You're incredibly likely to see the next leg up or down.

So while you're trading, don't forget to define your trading levels for later just in case a trade doesn't immediately pop up.

Remember, the best way to get started with premarket trading is to actually do it.

Get your feet wet, and crush those markets.

If you need more guidance, I highly encourage you join us in the Warlock's World today.

And as always, feel free to let me know if this was a useful read by sending me an email to [email protected].

I'll see you all tomorrow morning!

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