Trade the Stock Market After Hours? Is It Possible?

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Trade the Stock Market After Hours? Is It Possible?

The trading session is the period of time throughout the day when trading activity occurs. The primary trading session for most stock markets occurs throughout the day, and one trading session represents a single day of operations. The opening bell, which signifies that the market is open, marks the start of the session. Similarly, the trading day concludes with the sound of the closing bell. This is when the majority of trade occurs.

However, trade activity is not limited to this time of day. It does, in fact, occur after the market closes—that is, after regular business hours have concluded. This is referred to as an after-hours trading session. However, there are some significant changes between the regular trading day and the after-hours trading activity. Continue reading to learn more about the after-hours session, how to participate, and what to avoid while trading after the market shuts.

Key Takeaways

  • After-hours trading occurs after the markets shut.
  • Post-market trading typically occurs between 4 p.m. and 8 p.m. Eastern time (ET), whereas premarket trade concludes at 9:30 a.m. ET.
  • After-hours trading is made feasible via electronic communication networks (ECNs).
  • After-hours trading risks include reduced liquidity, wider spreads, more competition from institutional investors, and increased volatility.
  • After-hours trading enables investors to respond quickly to breaking news and is much more convenient.

What’s After-Hours Trading?

What Is After-Hours Trading?

After-hours trading refers to the time after the market closes when investors may purchase and sell assets outside of normal trading hours. The New York Stock Exchange (NYSE) and the Nasdaq Stock Market (Nasdaq) are both open from 9:30 a.m. to 4:00 p.m. Eastern time (ET).Trades may be executed during the after-hours session at any time between 4 p.m. and 8 p.m. ET.

Electronic communication networks (ECNs) link prospective buyers and sellers in these lengthy trading sessions without the need of a conventional stock market. During the after-hours trading session, trade volume is often low. This is due to the fact that there are normally relatively few active traders during this time period. This may alter if there is significant economic news or an unexpected new development at a corporation.

After the market closes, traders might also anticipate bigger spreads (the gap between bid and ask prices).

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Who Can Trade During the After-Hours Session?

Until mid-1999, when the services of ECNs were more widely accessible to ordinary investors, after-hours trading was largely employed by institutional investors. An ECN enables not only ordinary investors to engage electronically, but also huge institutional investors to interact anonymously, therefore concealing their activities.

Investors have welcomed extended trading as it has grown in popularity over the last decade. Indeed, a number of brokers, including Charles Schwab, Fidelity, and TD Ameritrade, now provide after-hours trading.

Before you begin trading in the after-hours market, be sure you have read all of the disclosure paperwork issued by your brokerage business.

Post-Market and Premarket Trading

After-hours trading is broken into two periods of the day. The first is the after-hours trading session. Post-market trading is typically available from 4 p.m. to 8 p.m. ET on most exchanges. You may also participate in premarket trading, which occurs in the morning before markets open (before 9:30 a.m. ET). The exchange determines when the premarket session begins.

Risks and Dangers

The growth of after-hours trading provides investors with the opportunity for significant returns, but you should be aware of some of the inherent risks and perils that come with investing at this time. These are some examples:

  • Less liquidity: During normal business hours, there are much more buyers and sellers. There may be less trading activity for your stock during after-hours trading, and it may be more difficult to convert shares to cash.
  • Wide spreads:As previously stated, a low trading volume may result in a large gap between the bid and ask prices. As a result, it may be difficult for a person to get their request performed at a reasonable price.
  • Individual investors face stiff competition: While person investors may now trade in the after-hours market, the truth is that they must compete against huge institutional investors that have access to more resources than the ordinary individual investor.
  • Volatility: In compared to normal trading hours, the after-hours market is lightly traded. After-hours trading is more prone to see dramatic price changes than regular-hours trading.

While technology may have an impact on the ordinary trading day, there may be additional lags and delays during after-hours trading, which means your transactions may not even be executed.

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Here are a few examples of the hazards involved with after-hours trading:

Assume an investor wishes to sell $250 worth of stock in a business called XYZ Co. after the normal markets have closed. Because the after-hours market is illiquid, the maximum offer price from the small number of purchasers is $240. She may either adjust her maximum price to $240 and sell immediately, or she can preserve her original pricing and risk a partial or unfilled order. All unexecuted orders are canceled at the conclusion of the trading session at 8 p.m.

Benefits

After-hours trading has a variety of hazards, but there are some potential rewards as well:

  • Trading on new information: Being able to trade beyond regular market hours helps you to respond rapidly to breaking news articles or new information before the following day’s market opens.
  • Although volatility is a danger connected with trading after hours, you may discover some enticing deals during this period.
  • Convenience:Some investors prefer to trade at off-peak hours, and after-hours trading allows them to do so.

Should I trade after hours or wait for the regular trading session?

It all depends on your risk tolerance, trading strategy, and whether you are entering or leaving a position. While the average investor may prefer to wait for the normal trading session, an experienced trader may dabble in the after-hours market to either settle a lost position or get a head start on beginning a new one. Make sure you are aware of the hazards associated with trading after hours, and consider if the advantages exceed the risks in your unique scenario.

Is it too risky to trade in the after-hours market?

It all comes down to the investor’s particular tastes and risk tolerance. Seasoned traders believe that the dangers of lesser volumes and greater bid-ask spreads are more than outweighed by the ability to act on fresh information before the following day’s normal trading session, as well as the possibility of trading mispriced stocks.

When can you trade after hours?

Most transactions take place between 4 and 8 p.m. However, the great bulk of after-hours trading occurs between 4 p.m. and 6 p.m., so use extreme caution if you want to trade in the last hour or two of the after-hours trading session.

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Does Robinhood allow after-hours trading?

Yes, Robinhood allows after-hours trading on its platform.

Can I use a market order to trade a stock after hours?

No, market orders are not permitted in after-hours trading. In after-hours trading, most brokerage companies only allow limit orders to protect investors against unexpectedly low prices caused by reduced trading volumes and greater spreads during this session.

Market Hours Schedule

NYSE (Tape A)

  • Pre-opening hours are 6:30 a.m. ET Monday through Friday.
  • Standard trading hours are 9:30 a.m. to 4:00 p.m. ET Monday through Friday.

NYSE (Tapes B and C)

  • Pre-opening hours are 6:30 a.m. ET Monday through Friday.
  • Monday through Friday, from 7 a.m. to 9:30 a.m. ET
  • Standard trading hours are 9:30 a.m. to 4:00 p.m. ET Monday through Friday.

NYSE American Equities, NYSE Chicago, NYSE National

  • Pre-opening hours are 6:30 a.m. ET Monday through Friday.
  • Monday through Friday, from 7 a.m. to 9:30 a.m. ET
  • Standard trading hours are 9:30 a.m. to 4:00 p.m. ET Monday through Friday.
  • Monday through Friday, from 4 p.m. to 8 p.m. ET

NYSE Arca Equities

  • Preopening: Monday through Friday, 3:30 a.m. ET
  • Early trading: Monday through Friday, 4 a.m. to 9:30 a.m. ET
  • Standard trading: Monday through Friday, 9:30 a.m. to 4 p.m.ET
  • Late trading: Monday through Friday, 4 p.m. to 8 p.m.ET

Nasdaq Stock Exchange

  • Monday through Friday, from 4 a.m. to 9:30 a.m. ET
  • Standard trading hours are 9:30 a.m. to 4:00 p.m. ET Monday through Friday.
  • Monday through Friday, from 4 p.m. to 8 p.m. ET

U.S. Stock Exchange Holidays

U.S. markets are closed on the following days:

  • New Year’s Day
  • Martin Luther King Jr. Day
  • Presidents Day
  • Good Friday
  • Memorial Day
  • Independence Day
  • Labor Day
  • Thanksgiving Day
  • Christmas Day

U.S. Stock Exchange Shortened Trading Days

The stock exchanges in the United States have reduced their trading days and will shut early on the following days:

  • 9:30 a.m. to 1 p.m. ET on Black Friday (the day following Thanksgiving).
  • 9:30 a.m. to 1 p.m. ET on Christmas Eve

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