After-hours trading is the Wild West of the stock market. Equities are more susceptible to quick and dramatic swings when trading volume is low and fewer buyers are actively bidding on the stocks.
That's a lot of money and danger; it can be hard to tell which is which in some cases. What causes after-hours stock fluctuations? Some trading tactics, as well as the benefits and drawbacks of after-hours trading, are discussed.
What Exactly Is an After-Hours Trade?
Trading in securities continues after the end of the market, during the after-hours trading session. The regular trading hours for the NYSE and the Nasdaq Stock Market are Monday through Friday, 9:30 am to 4:00 pm. The after-market trading period runs from 4 to 8 pm Eastern Time.
Electronic communication networks facilitate matching buyers and sellers outside of a centralized stock market during these lengthy trading periods. After-hours trading often sees low volumes of trades. This is because there are often very few dealers present at these times. However, this might shift with a surge in volume due to unexpected economic news or a company's internal changes.
Who May Participate In The After-Hours Trading Session?
Before the introduction of electronic communications networks in the middle of 1999, institutional investors largely employed after-hours trading. To hide their true intentions, huge institutional investors can do business electronically on an ECN the same way retail investors can.
The last decade has seen a rise in the popularity of extended trading, and investors have responded positively. Charles Schwab, Fidelity, and TD Ameritrade are just a few brokers allowing trading beyond regular business hours.
After-Market And Premarket Trading
There are two different time frames for trading after regular market hours. The first occurs after the market closes for the day. Premarket trading begins before 9:30 am. ET, when the markets officially open, is another option. As with the regular trading day, the premarket session begins depending on the specific exchange.
Reasons For After-Hours Trading
Even after the closing bell rings at 4 pm, there may still be traders trying to enter or exit positions so that trading may continue for another hour or more. It may occur inequities that do many millions in volume a day. These high-volume equities may experience some after-hours trading daily.
In the case of many equities, especially those with lesser activity during the regular session, there may be no trades at all during the extended period. Earnings and other news events are regularly reported after business hours. Earnings are an important statistic for institutions and investors to examine when deciding whether or not to purchase a stock, and they can result in large price swings.
Locating A Moving Company That Will Work After Hours
There are a handful of locations to check for investors who want to get into trades following results or day traders who want to trade the earning volatility. Companies typically announce earnings release schedules in advance (and whether it will be after hours). Yahoo! Finance publishes every single profit.
Investors may keep tabs on equities making moves after market close by using either the NASDAQ After Hours Most Active list or the MarketWatch After Hours Screener. In addition to the regular active list, the premarket and after-hours active lists are often available on most trading and charting systems. See if your broker or platform provider offers this feature.
A Guide to Trading After Hours
While many choose to tailor their trading methods to the after-hours market or news developments, most investors and traders continue their usual methods of operation when the market is closed. Traders might choose either a trend-following or news-related approach.
Traders should adjust their strategies to account for wider spreads, lesser volume, and larger price swings while after-hours trading, even though the general rules of thumb will remain the same. A greater potential for catastrophic losses exists if stop losses are rendered ineffective for these reasons. If you plan on doing any after-hours trading, it could be wise to trim your position size.
A Closing Remark On After-Hours Trading
US stock markets are open for "after-hours" trade from 4 pm to 8 pm Eastern time. However, not all stocks have after-hours trading, even though it is possible to do so during this time. Indeed, the vast majority of stocks do not. Most stock markets are deserted after 4 pm, with no buyers or sellers ready to meet the day's closing price.
After the market closes, there may be some trading in stocks that have a daily volume in the millions of shares. Earnings reports often trigger large after-hours price changes and a high volume of trading activity. Again again, not all stocks will have sufficient volume for day trading to continue into the night.
