Premarket trading is the trading session that happens before the normal trading session starts. The session allows both institutional investors and individual traders to trade stocks between 4:00 a.m. ET and 9:30 a.m. ET.
Brokers, however, can determine the exact timeframe during which premarket trading takes place. One broker may decide to offer trading running from 4:00 a.m. ET to 9:30 a.m. ET, while another may offer it from 6:00 a.m. ET to 9:30 a.m. ET.
For example, TD Ameritrade offers premarket trading from 8:00 a.m. ET to 9:15 a.m. ET, while premarket trading at Scottrade begins from 6:00 a.m. ET to 9:28 a.m. ET. Some brokerage firms do not offer trading in the premarket at all.
Premarket trading occurs on electronic market exchanges, and it has been growing in popularity since 1990 as investors continue to embrace the idea of trading stocks over electronic communication networks.
In the past, only hedge funds, banks, insurance companies, mutual funds, and other institutional investors were allowed to place premarket orders.