Did you know some critical market moves happen outside regular stock market hours? From overnight trade wars to breaking news on a drug that will cure cancer, stuff goes down outside the 9:30 a.m. to 4:00 p.m. trading session. Maybe it’s Stocktwits going wild on the news, alerts going off in your pre-market scanner, or rumors that a company will not meet earnings. “Somebody knows something, and it’s your job to find out what that something is.” Traders can capitalize on stocks moving after hours.
Stock Market Hours Explained
- On the NYSE and Nasdaq exchanges, after-hours trading takes place in two sessions.
- Post-market trading is between 4:00 pm and 8:00 pm.
- The opening time of the pre-market trading session varies, but it ends at 9:30 am.
- Electronic communication networks allow after-hours trading.
- Risks from after-hours trading include low volume, low liquidity, high volatility, high bid-ask spreads, and competition from institutional investors.
- After-hours trading is convenient for those who can’t trade the “normal” stock market hours.
- Stock market hours are 9:30 am-4 pm EST. This is different from pre-market and after-hours trading.
What Is After Hours Trading?
After-hours trading is trading securities outside of regular “business” hours. If you’re an investor trading on the New York Stock Exchange (NYSE) and the Nasdaq, typically, you trade during normal operating hours. Those stock market hours are 9:30 am to 4 pm.
Trading after hours would be between 4:00 pm and 8:00 pm Eastern Time. Which, in essence, is stock market hours. However, the trading is divided into two different parts: the post- and pre-market periods.
First, post-market trading – which most exchanges usually operate- is between 4:00 and 8:00 pm. Alternatively, pre-market trading happens in the morning, sometimes before 9:30 am. Granted, this depends on the exchange. Some brokers, like Webull, will let you trade at the butt crack hour of 4 am. Futures trading opens on Sundays at 6:00 pm EST.
Who Can Trade Stock Market Hours?
Typically, up until the 1990s, after-hours trading was primarily done by institutional investors. And what changed in the 90s (besides VCRs not being a thing anymore)? The introduction of ECNs! Electronic communication networks (ECNs) allow after-hours trading; they match prospective buyers and sellers without using a traditional stock exchange.
The arrival of electronic markets has made trading outside market hours accessible to retail traders like you and me and investors. ECNs leveled the playing field. It allows people like you and me to interact electronically – we don’t need to go to the pit.
However, it will enable large institutional investors‘ anonymity – they can hide their actions. You may like the stock market hours of 9:30-4 for trading better.
What Brokers Offer After-Hours Trading?
In light of the popularity of extended stock market hours, brokers responded in kind. Many now offer after-hours trading.
Here are a few examples of after-hours brokers:
- Charles Schwab
- Fidelity
- Webull
- Robinhood
They all have different hours, so you’ll need to do some additional research as these companies change their hours from time to time. For example, Robinhood has after-hours trading, but it isn’t the best. Robinhood’s extended trading hours are 9:00 am to 6:00 pm Eastern.
Extended Stock Market Hours Advantages
Does the early bird get the worm? In some cases, yes, yes, they do. So, if you’re an early bird, here’s some good news to capitalize on with fun stock market hours:
- New News. It’s surprising what can happen overnight. Considering the markets overseas open before we wake up, we are guaranteed some excitement upon waking. Whether it’s breaking news from China or Europe, the effect on the market won’t go unnoticed. Personally, one of my strategies, the premarket gap, and crap, is based on this. If a stock is soaring in the premarket due to some news, traders will want to liquidate their positions for profit. And I wait. The idea is to short into the reversal once this sell-off happens.
- Pricing Opportunities. In some instances, you might find reasonable prices in the after-hours. Remember that high volatility is a risk – see below, but you may be able to get a bargain.
- Convenience. Depending on your schedule, you might be unable to watch the markets during the day. This is especially true if you work a Monday-to-Friday gig with a helicopter boss from 9 a.m. to 5 p.m. I’m pretty sure they aren’t going to appreciate you trying to place trades from your desk.
Risks & Dangers
Despite these advantages, you must be aware of the risks and dangers of after-hours trading during stock market hours:
- Low Volume. With fewer buyers and sellers, it may be hard to exit positions quickly. In other words, these stocks lack liquidity. You might be left bag-holding with no one to buy your shares. In other words, finding yourself in this position is not a good thing.
- Wide Bid-Ask Spreads. Another less-than-ideal situation. Due to low volume and liquidity, it’s hard to get executed at the price you want. As a buyer and seller, you want to get the best price for a stock. But with limited buyers and sellers after-hours, it’s difficult for brokers to match up the parties. For that extra work, you pay a premium. I suggest sticking with stocks with a $0.05 bid/ask spread difference.
- High Volatility. Once again, it is a dangerous situation to be in. With low volume and wide bid-ask spreads, you will likely encounter extreme price fluctuations. Thus, a trade can quickly go against you when a trend rapidly reverses. Since you can’t immediately exit, you are once again bag-holding.
- Competition. I hate to rain on your parade, but the reality of after-hours trading is you’re competing with the big boys. In other words, large individual investors with access to bottomless capital pits are playing here. The average Joe is up against stiff competition in this arena.
Trading Example
Say I want to sell my Apple shares for $250.00 after normal stock market hours. Because of the highly illiquid after-hours market, the highest bid price I can get from the sparse number of buyers is $240.00.
What am I to do? I can change my limit price to $240.00 to sell immediately. Or, I can keep my original price of $250.
But I also run the risk of a partial order or an unfilled order. Further to that, at 8:00 p.m., the trading session ends, and all unexecuted orders are canceled. As tempting as it may be to rush in and start trading after hours, setting yourself up correctly is essential. You can learn to trade in any market with the right training and education.
Frequently Asked Questions
Stock market hours for Black Friday are 9:30-1. So the market is open for half a day. The bond market closes at 2 for a half day as well.
Extended stock market hours allow for after-hours trading. You can trade using ECNs after normal market hours.
