The period of time in a day when trading activity takes place is known as the trading session. For most stock markets, the main trading session takes place during the daytime, when one trading session represents a single day of business.
The beginning of the session is marked by the opening bell, which signals that the market is open. Similarly, the trading day ends with the closing bell.
Most trading takes place during this time of day. It does, in fact, take place after the market closes—once normal business hours are done.
This is known as the after-hours trading session. But there are some key differences between the normal trading day and the after-hours trading session. Read on to find out more about the after-hours session, how you can take part, and what you need to watch out for when you trade after the market closes. After-hours trading is the period of time after the market closes when an investor can buy and sell securities outside regular trading hours. Eastern time ET. Trades during the after-hours session can be completed anytime from 4 p.
In these extended trading sessions, electronic communication networks ECNs match potential buyers and sellers without using a traditional stock exchange.
The trading volume during the after-hours trading session tends to be fairly thin. Traders can also expect wider spreads—the difference between the bid and ask prices—after the market closes. After-hours trading was used primarily by institutional investors up until mid, when the services of ECNs became more widely available to retail investors.
An ECN not only allows individual investors to interact electronically but also lets large institutional investors interact anonymously, thereby hiding their actions. As extended trading has become increasingly popular over the past decade, investors have embraced it. Make sure you read all the disclosure documents prepared by your brokerage firm before you start trading in the after-hours market. After-hours trading can be divided into two different parts of the day. The first is the post-market trading session.
Most exchanges usually operate post-market trading from 4 p. You can also take part in premarket trading, which takes place the morning before the markets open—before a. The start of the premarket session depends on the exchange. The development of after-hours trading offers investors the possibility of substantial gains, but you should also be aware of some of the inherent risks and dangers that come with investing during this time.
These include:. While technology can affect the regular trading day, there may be more lags and delays during after-hours trading, meaning your trades may not even go through.
Order Execution. Get in touch Call or visit a branch. Go City, State, Zip. Now introducing commission-free online trading. Learn more. Open new account. More trading hours, more potential market opportunities With news breaking overnight, today's highly connected world requires a way to react right when market moving events happen. Trade on your schedule, not the market's Regular market hours overlap with your busiest hours of the day.
Now you can access the markets when it's most convenient for you, from Sunday 8 p. ET to Friday 8 p. These securities were selected to provide access to a wide range of sectors. Imagine a hedge fund that was expecting a company to announce a large loss and instead, only a small loss appears, so the Fund covers its short by bidding the share price up. In many cases, these extended sessions reactions from a limited number of traders become just as much part of the news about the company as the earnings results themselves.
Many hedge fund and retail margin calls and liquidations can take place after hours or in the premarket session, sometimes with extreme results. If a brokerage finds its client in default and the brokerage chooses to liquidate an account, that could mean there is one large seller of stock at a time with few buyers and prices could be forced down rapidly or in the case of covering a short position, one buyer and no sellers.
This buying or selling by a brokerage could deepen the losses for a client whose account is being liquidated. Extended-hours trading can be a good way for investors who think they have an edge in trading events, such as earnings announcements to try to take advantage of sharp moves.
However low liquidity and other limitations can also provide traps for the unwary who may not be able to buy or sell when they expect, or might large changes revert to the mean in the following session.
News Smart Portfolio Markets. After-hours trading is exactly what it sounds like: trading that takes place once the stock market closes for the day, which in the U. Eastern time. Similarly, for early birds there is a trading session before the market opens at a. Eastern, called premarket trading. The two combined make up extended-hours trading. Why would you want to trade in the off-hours? You actually might not. Here are the details, complete with advantages, disadvantages and risks.
Trading during extended hours takes place when the major exchanges are closed, so orders are placed through computerized trading systems, or electronic markets. Because of the lower volume of orders, there are different rules for after-hours trading. These rules are typically set by brokers and include such matters as the hours trading is available and the order types allowed during those hours.
For example, orders are often required to be limit orders, which means an order will be filled only at a certain price or better.
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