Pre-Market Preparations – Things to Know Before Trading Begins
As with all things, preparation is key to success. As a stock trader, while you cannot exactly know where the market will go in the next few days, weeks or months, gathering information can help your prepare yourself for whatever may come. Here are some of those important things you need to know as part of your pre-market preparations.
Stock Index Features
Look at stockmarkets’s highs and lows printed in index futures such S&P 500, NASDAQ 100, and Russell 2000 Index for overnight sessions. This data will help you speculate on the stock market’s entire performance, short sell an index with a futures contract, or hedge a long position against value decline.
Macro Market Forces
Read the news and look for stories that could move a market overnight and consider how they will impact the trading session. Macro forces are usually market specific. Markets usually have their own market movers and shakers from time to time, so keep yourself updated.
Initial trading volume is usually high in the morning compared to the rest of the day. Therefore, morning volume compared to closing volume explains little. What you need to pay attention to instead is the volume in the following days. This is because increase volume generally means increased market volatility. It also indicates possible changes in prices. Low volume near the open of a stock, on the other hand, signifies that traders are primarily involved for short term.
Before you even begin trading, find any possible safe exits, especially if you expect the market to take a hit. Stock guru Jim Cramer suggested that the best to do so is to take a look at chart of your stock. As a stock trader, you should be able to spot the bottom for the best entry points and ceiling for the best exit points according to Cramer.