Premarket Strategies/Playbook

[BrandonB 4]

Hello,

Does anyone trade premarket successfully? Is there any type of strategy I should be looking at? I'm trying to develop my playbook & would like to attempt early morning trades.

 

Thank You!

[Corey Cloin 1]

I'm not particularly good at it myself, so take this with a grain of salt, but I've been practicing at it pretty regularly and a couple things I'd suggest:

- Trade very small share sizes. Think about your normal comfortable share size and halve that and maybe even think about halving it again. Even with small share sizes the slow moving "start/stop" nature of pre-market can drop or boost a position you've been staring at for 5 minutes with no action in a split second.

- There's usually one or two "stocks in play" but they tend to be low float stocks and you should plan accordingly. It's definitely possible to make money on them, but again keep those share sizes to a level your very comfortable with losing money on. Oh, and AAPL always seems to be in play in premarket, but with the lower volume the price action is often very erratic and confusing.

- Generally I find the 5 minute chart more useful. On the one minute even with stocks in play the price action can be all over the place, but the 5 minute can give you a better idea of where things are going.

- Maybe plan on only making 1 good (small) trade in premarket, and if it doesn't work, oh well and wait for the bell. An issue I consistently run into is taking a few too many trades premarket, and then I come into the market open hot and start overtrading there as well, which almost always leads to a red day for me.

- As far as strategies: I've noticed that generally stocks tend to spike at the open of premarket (when I'm sleeping, Pacific time here), then tend to slowly sell off until 20-10 minutes before the opening bell, then start to pick-up again until a couple minutes before the opening bell, at which point they either spike or sell off (seems like a crapshoot more often than not which way they go).  My best pre-market trades have generally been in that 10-15 minute rising window with me getting out of the trade around 3 minutes before the bell. Otherwise the same strategies you apply to normal hours should apply pre-market as well, just with much lower volume numbers.

- Don't hold trades through to the bell unless your in a very good position. If they don't sell off right before the bell, they often sell off right after. Will you sometimes miss out on the last minute pre-opening bell spike? Yes. Is it worth getting caught in fall? No.

- Trade with small share sizes! Not to re-emphasize that too much, but it really is the most important rule in my limited experience with pre-market.

And good luck! Know that I'm out there experimenting in the pre-market with you!

[BrandonB 4]

Thanks Corey!!