Personal Finance & Money Asked on April 26, 2021
I was interested in pre-market trading and see that Nasdaq for instance has some activity from 4am (hours in the fig below are shifted to GMT+2, 7 hrs ahead, as I live in Israel). The stock shown below got an FDA clearance after hours and thus the jump was expected. To have a chance at getting in on this I would have to use an exchange (unlike my current, TDA, which opens at 7am) that allows trading from 4am .
If you look at the volume you can see an initial tiny spike at 4am (1100 local) when zacks and others start trading, another bigger spike at 7am (1400 local) where TDA (and I assume others) begin, then a large spike at 930am (1630 local) where regular trading starts. The first two saw upticks in price while the last saw a big selloff driving price down.
So lets say I open an acct at zacks or webull (the ones I currently know of that allow 4am premarket trades).
My first question concerns the market-making mechanism here. There are going to be a bunch of piled-up buy orders . Iiuc normally the bids are lower than asks and the highest bid gets filled (for a market sell) , first come first-served in case of a tie. So – question 1 – what happens when there’s a bid higher than the lowest ask (as one imagines will have occurred here) – highest bid gets filled first, with the actual price being the ask price?
In my current exchange I can’t actually place a premarket limit order too far above the market closing price, and can’t enter a market order. And the spike seen in the figure is too fast to wait for the premarket open and enter a trade, I blv. So – question 2 – is there any way for a ‘level II’ non-institutional trader to get in on this kind of movement ? I could only enter a maximum limit order of ~44$. If the mechanism described above is true, even if I entered the $44 limit order for the 4am session it would still not have been filled, I assume, as there would be plenty of limits at higher prices and the price would swing up past my range before I could react.
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