Stock exchanges typically have set hours during which they operate, but trading activity isn’t restricted to traditional operating hours. After-hours trading sessions allow investors to continue making trades once the markets have closed for the day.
While after-hours trading isn’t exactly the same as regular day trading, there are some advantages to 24/7 trading. For investors who are interested in trading outside normal stock exchange hours, there are some important things to keep in mind.
Reviewing After-Hours Trading
In the U.S. the NYSE and the Nasdaq are the two primary stock exchanges investors can use to trade stocks and other securities. Like the NYSE, the Nasdaq also follows a 9:30 am ET to 4:00 pm ET operating schedule, with certain holidays observed.
Both the NYSE and the Nasdaq allow after-hours trading. After-hours trading is divided into two distinct windows: pre-market trading and post-market trading.
What Is Pre-market Trading?
Pre-market trading allows investors to make portfolio moves in the hours before the market officially opens for the day. For both the NYSE and the Nasdaq, the pre-market trading period extends from 4:00 am ET to 9:30 am ET.
The NYSE also allows for a 30-minute pre-opening season beginning at 3:30 am ET in which limit orders can be entered and queued ahead of the pre-market session.
What Is Post-market Trading?
Post-market trading, also referred to as extended trading, runs from 4:00 pm ET to 8:00 pm ET on both exchanges. If an investor is completing after-hours trading with an online brokerage, the brokerage may set their own hours for when trading can occur, within the time frames the NYSE and the Nasdaq follow.
Of course, this timing pertains to the U.S. markets only. Globally, foreign markets have their own operating hours. Due to time zone differences, stock markets in the U.S. and markets in other countries don’t always operate during the same time periods.
💡 Quick Tip: Look for an online brokerage with low trading commissions as well as no account minimum. Higher fees can cut into investment returns over time.
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How After-Hours Trading Works
After-hours trading takes place outside the regular markets so it doesn’t work exactly like regular day trading. During the day, trades occur through exchanges — but during pre-market or post-market trading, they’re completed through a different type of exchange — technically, an alternative trading system known as an electronic communication networks (ECNs).
An ECN matches up buy orders with sell orders from different investors to execute trades. Orders can only be matched if the buy and sell prices are the same.
Just like regular day trades, investors may pay commissions to execute an after-hours trade. But the fees charged may be higher than the fees for normal day trades.
Is 24/7 Trading an Option?
Being able to trade stocks 24 hours a day, 7 days a week might sound appealing to active traders or investors who don’t have the opportunity to make trades during regular market hours. But is 24/7 stock trading even possible?
While after-hours trading allows investors more time to execute trades, there is a gap in between the post-market and pre-market hours. Technically, an investor wouldn’t be able to trade between the end of the post-market period at 8:00 pm ET and the beginning of the pre-market period at 4:00 am ET.
However, some online trading platforms have begun rolling out 24/7 trading as a brokerage account option. With this feature, investors would be able to make trades at all times of day — during regular market trading hours, pre-market trading hours, post-market trading hours, and beyond.
For example, if an investor wanted to place a limit order to purchase 100 shares of stock at midnight, they could do so if their online brokerage offered 24/7 trading.
Depending on which trading platform investors are on, they may be limited as to the type of securities they can trade after-hours. For example, some brokerages may only allow 24/7 trades of select individual stocks and exchange-traded funds (ETFs).
Pros of 24/7 Stock Trading
Being able to make trades on one’s own schedule, rather than following the market’s standard trading hours, can yield some benefits.
Trading stocks and other securities after the market closes and before it opens could pay off if an investor is able to capitalize on overnight news or market developments that could affect stock prices, including:
• Earnings reports. It’s common for companies to release earnings reports after the market has officially closed for the day. If the earnings report looks to boost a stock’s price or cause it to decline, an investor might choose to place an after-hours trade to buy or sell, according to their investment strategy.
• The announcement of a merger or acquisition.
• A major political event. For example, the results of a presidential election can influence market outlooks and trading activity.
Trading overnight could allow an investor to get the jump on other investors who normally trade during the day.
There’s also the convenience factor: 24/7 trading is helpful for investors who don’t have time to watch the markets and schedule trades throughout the day.
Trading after-hours means they don’t have to miss out on any opportunities to build and grow their investment portfolio if their day job keeps them busy.
💡 Quick Tip: When you’re actively investing in stocks, it’s important to ask what types of fees you might have to pay. For example, brokers may charge a flat fee for trading stocks, or require some commission for every trade. Taking the time to manage investment costs can be beneficial over the long term.
Risks of After-Hours Trading
While having access to 24/7 trading can have its advantages, there are a few potential downsides to keep in mind.
• Limit orders aren’t guaranteed. There’s no guarantee that limit orders placed after-hours will be executed. For a trade to be completed, an ECN has to be able to match up your order with another investor’s. Since trading volumes are typically lower during the pre-market and post-market periods, finding a match could prove difficult. Or you could get stuck in a trade at a less than desirable price.
• The potential for increased volatility. Lower trading volume can also lead to increased volatility and sharper, more sudden price movements. For example, an investor may see a much wider gap between the bid price and ask price during after-hours trading.
Those things make 24/7 trading of stocks or other securities riskier overall. For investors considering this strategy, it might require them to pay closer attention to market movements to minimize the potential for losses.
While 24/7 stock trading was a long-time a dream for some investors, now it’s becoming a reality. As online trading platforms start to offer 24/7 trading to their investors, trading at any hour of the day or night is increasingly possible.
While there are risks to 24/7 trading — notably the chance of increased volatility as well as that a limit order won’t get executed — there are also benefits, such as the convenience of not being limited to the 9:30 am to 4pm ET confines of the NYSE and Nasdaq.
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Extended hours are from 9 AM – 9:30 AM and 4 PM – 8 PM ET Monday to Friday. Only limit orders can be placed during extended hours. Orders placed after 4 PM ET that and not filled by 8 PM ET will be canceled. Trading during extended hours involves greater risk including lower liquidity and greater volatility.
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