The first definition of Pre-Markets (also known as “Spot” markets) is that they aren’t affected by fundamental economic factors and are instead price driven. This definition would make the Pre-Markets a sort of value-based investment vehicle. A good example of a Pre-Market market would be a car dealer in Mississippi who buys a car from a wholesaler at a price that is much lower than the market value and marks up the car for his profit. Or a retailer who buys goods from a wholesaler at a pre-listing price that is higher than the real market value. Both retailers are essentially buying the goods at a discount – so if you are speculating on whether a particular stock will go up or down in value, this is a poor form of investing.
While some people have been attracted to the Pre-Markets due to the low barrier of entry for new retail investors, it has also given birth to a number of myths and misunderstanding towards the market. Some investors still think that the Pre-Markets are a platform where the future of forex trading lies, and that nothing can be done in terms of speculation. As with any platform, the pre-marks still require fundamental analysis and are nothing more than a time-lag based snapshot of price feeds from major world markets. And just like any other market, the volatility of the pre-marks can result in large price movements in real time.
The reality is that there are no “futures” in the world of trading, and the trends you see in the paper have been happening for years. What you need to understand is that the trends you see on your screen are the result of present-day data being translated into price feeds by traders in real time. This is why you find the pre-markets so attractive; they give you the opportunity to trade before the price moves at all. Unfortunately, in reality there is no “futures” in the forex trading world – at least, not yet.