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Day traders should treat the opening bell of the day the same as the beginning of a race. However, there’s a good deal of prep work that should be done before the bell each day. Traders can’t predict how the day will turn out, but they can get a good sense of how it will go.
Pre-Market Action
Scanning pre-market activity can give you a good idea of how the day will play out and help you establish your trading goals. Futures are available around the clock, but many day traders prefer to stay within trading hours, which is the busiest time for these markets. Pre market movers can be a good indication for which way the day will go. Around 8:30 AM EST day traders can tell which way the day will go based on several indicators. Major economic news should factor into your plan for the day. These news pieces tend to drop about an hour or so before the market opens, which is good for day traders who scan the market before it opens.
Picking Stocks
Once you’ve got an overall sense of the direction the day will trade, you can begin to look at stocks that should be on your radar for the day. Gap scanners can help you find stocks that have shown momentum since the end of day trading. Trading with a broker can help you find these picks because they provide pre-market trading and real-time quotes. Use the internal scanner from your broker and the news feed to find any gainers for the morning. If you’re starting out and don’t have access to a broker, several offer demo accounts that are free to create. Pre-market trading can be learned without putting up a dime in investment with the right broker account. Pre-market movers help establish the direction a trade will go but remember that it is not an exact science. Pre-market hours naturally see fewer traders involved in the market. This lack of traders may result in erratic moves and create misleading information.
Is It Useful?
Finding pre-market movers can be a solid strategy in helping to find winning stock picks for that day. However, it should not be your only means of finding stocks to day trade. Remember that technical analysis can help you establish patterns that are profitable to trade in both bullish and bearish markets. Day traders who incorporate pre-market scanning into their routine tend to have a better idea of how the day will go. Pre-market moves that are bleeding into the red could signal a downturn that’s not worth playing for short-term traders.
TheStreet is also an excellent place to look for pre-market gainers after the fact. The site often provides a list of pre-market gainers that appear to be at the head of the pack shortly before the bell rings. A gap scanner can help you find these pre-market gainers in several different ways. Technical analysis can help you find these gaps and make the most of this early market information.
