What does the “pre-market” stock quote mean when I look up a stock before the opening bell ?

Jay Dub: What does the “pre-market” stock quote mean when I look up a stock before the opening bell ?
What establishes the “pre-market” price??? Is it usually any indicator for the regular trading day ??? I basically want to know if it’s relevant to anything.

Answers and Views:

Answer by Joe P
A while back new “extended market hours” were established. Your brokerage firm needs to disclose some things to you before approving you for trading. Mostly they need to make clear to you that often times so few shares trade that liquidity may suffer and prices may move erratically. So, you never use a market order, only limit orders. The prices trading in the pre market and after market are sometimes an indication of what is to come during the next regular market. This is pretty much for professional traders and money managers. The pre market price is established just like the regular market. The highest offer to buy is the bid. And the lowest offer to sell is the ask. I have used the pre market to trade on a news item and have been wrong as often as I have been right. So, now I usually wait for the the better liquidity of the regular market.

Answer by The Son of Rage and Love
Extended hours trading dictates prices strictly by the bid and ask of a relatively small number of buyers. It gives a general idea of the price direction, but prices tend to be more volatile than in regular hours trading.