Stock market trading hours vary around the world. For example, the New York Stock Exchange and Nasdaq are open between 9:30am and 4:00pm ET. During this period of time, people can quickly buy and sell stocks as needed. However, there are times when investors wish they would be able to trade after the normal trading hours. In this case, they can choose to use the after-hours trading method.
When trading in after-hours trading, the process is similar to that of traditional trading where buyers and sellers buy and sell specific stocks. However, with fewer people trading after hours, stocks are generally less liquid and have wider bid-ask spreads, affecting their prices. Many traders may find that after-hours trades generate more price volatility, with larger ups and downs, thus requiring limit orders.
Hours Of After-Hours Trading
Outside of regular trading hours of 9:30 a.m. to 4:00 p.m. ET, investors can choose to trade during pre-market hours and after-hours trading hours. Pre-market trading is available from 4:00AM to 9:30AM ET, while after-hours trading hours are from 4:00PM to 8:00PM ET.
How Does After-Hours Trading Work?
After-hours stock trading used to be limited to high net-worth investors. With the popularity of the network, everyone can trade before and after the market. As mentioned earlier, those interested in doing after-hours trading should plan to use limit orders as the market is more volatile. The purpose of a limit order is to fill the order only at the price specified on the order and not at the current price. In other words, the trader will specify the number of shares they want to buy or sell, together with the price they want for this order. What’s more, the order will only be executed if the stock meets this target price. This helps protect traders in the event of a sudden rise or fall in price. If this sudden rise or fall occurs while a person is in the middle of a trade, they may find themselves buying at a price they did not intend, potentially resulting in serious losses.
How Does After-Hours Trading Affect the Market?
Investors should have some basic knowledge about how after-hours trading affects the stock market during normal hours. Trades completed in the pre-market and after-market markets do not automatically determine a stock's opening price, although they may affect the opening price. The opening price is determined by the first purchase of the day. While a stock has seen a sharp rise or fall during after-hours trading, it won't necessarily open as high or low as it would during non-standard trading hours. However, the first trade of the day tends to be influenced by traders before the market opens. Investors will need to consider the impact of these trading hours on stock prices on a case-by-case basis.
On the other hand, many traders find that trades made at the close of the stock market do provide valuable information about the future performance of a particular stock. For example, some companies may release important information like quarterly earnings reports only before the market closes. These reports can provide valuable information on how the current company stock is reacting to the news, which can help traders to invest in this company more wisely.