Lesson 16 of 31 · Zero to reading a chart

Premarket Trading: There Is Trading Before 9:30

Premarket is real trading from four in the morning, New York time, with far fewer people in it - thin bars, holes where nothing traded - and an ordinary order placed before the bell waits for 9:30; only an order with a price written on it trades early.

It is four in the morning in New York. Is anybody trading?

Most people say no. The market opens at nine thirty. Nothing happens before that.

Something does. It is real trading. It is just not the same thing.

Here is what you can now read, from the last seven. A candle is four numbers.

Its body is who won. Its wick is what was not held.

Its colour compares its close to its own open.

The timeframe is the box size.

The day runs nine thirty to four, New York.

Every percentage is measured from yesterday's close.

And a gap is the space between that close and today's open. A night of decisions.

Some of those decisions do not wait for nine thirty.

Think of a shop that officially opens at nine thirty. But the side door has been unlocked since four in the morning.

A few people know. They come in and trade with each other, quietly. So few of them that the prices they agree are jumpy.

That early stretch has a name. Premarket. It starts at four in the morning, New York time. It runs until the bell at nine thirty.

Then the front doors open, and it becomes the day you already know.

Premarket is real trading, from four in the morning. Far fewer people are in it.

Here is the real thing. One stock, one minute per bar. But this time the chart starts at four in the morning.

Look at the left side. Thin bars. Holes where nothing traded for minutes at a time.

Now look at nine thirty. The bars suddenly fill in, solid and connected. Same stock. Same day. Two different rooms.

Now zoom in on one early stretch. Here is a bar. And beside it, nothing. Minute after minute with no trade at all.

Then one trade, and a bar appears. That is what fewer people looks like on a chart. The bars are thin because the room is nearly empty.

And here is the sentence nobody tells you. Place an ordinary order at eight in the morning. It does not trade at eight. It waits in a queue until nine thirty.

Only one kind of order trades before the bell. One with a price written on it. A limit order. Limit just means this price, and no worse. It is the order type, not your account.

Before nine thirty there is a side door. Real trades, few people, thin bars.

And only an order with a price on it gets through that door.

Here is the mistake. Somebody sees a move at seven in the morning. They read it like a nine thirty move.

It was made by a handful of people in a nearly empty room. Real, and not the same thing.

Tomorrow, before nine thirty, look at any chart. Find the thin bars on the left.

Check yourself

When does premarket start?

Four in the morning, New York time.

Why are the bars thin?

Far fewer people are trading.

What happens to a normal order placed at eight in the morning?

It waits until nine thirty.

Next lesson: This is what the chart looked like at 9:35. That's all anyone had..

For learning only. Not financial advice, not signals, not stock picks.