Novice stock traders you know that the stock market has regular trading hours. Unless it is a holiday, the market is open for business from 9:30 AM to 4 PM, Monday through Friday.Billions of shares are traded in the US markets alone, making them highly liquid and efficient.

What new traders may not know is Exchange is also open for business before and after regular trading hours. Pre and post market trading sessions allows investors to trade stocks between 4:00 am and 9:30 am during pre-market trading and between 4:00 pm and 8:00 pm for the post-market session.

Compared to the billions of shares traded during the day, after-hours sessions only trade a small fraction of that volume, which causes other issues that traders need to consider before trading outside of the normal day. Can you make money trading before or after the bell? It is possible, but you need to do your research first.

Responding to company announcements

Companies are strategic about how they announce important information such as earnings reports. They don’t like to make announcements during regular trading sessions because it could cause a backlash that distorts the true value of their shares. If a company announced its last quarter’s earnings and they were weaker than expected, a large-scale outflow of stocks could lead to unwarranted large losses.

But the value of stocks can move even when the market is not open. Investors will want access when that value changes, which is why after-hours sessions are so important. So if you trade when these announcements are made, it means you are better able to react to the news. Once the market opens, stock prices will have already changed, making the stock price a better reflection of fair value. And if you’ve already reached that point, it may have become too late to make a trade.

Economic indicators

Many economic indicators are released at 8:30 a.m. – an hour before trading begins in New York. The market’s reaction to these indicators can cause large price movements and therefore set the tone for the trading day.

For example, the jobs report from the US Bureau of Labor Statistics (BLS) – released on the first Friday of each month – has one of the biggest impacts on the market. When data releases are above or below expectations, traders can expect volatility in the market.

Liquidity limitations

In the past, trading before and after hours it was one of the benefits of being an institutional investor. Retail investors did not have access, but this has changed since the markets switched to computerized trading. Retail investors now have access to these markets, but is it wise to trade these after-hours sessions?

Securities and Exchange Commission (dry) wants you to know a few facts before trading after hours. First, these markets are less liquid. Also, because there are far fewer people trading, you may not be able to sell your shares. If an earnings announcement is worse than expected and you want to sell your stock quickly, you may not be able to, especially for smaller, non-blue-chip companies.

Wider spreads, higher volatility

Another factor to consider in after-hours trading is the bid-ask spread. The spread between the two prices could be wide, meaning that the small number of traders did not agree on a correct price. Therefore, you may have to settle for a price that does not reflect fair value.

Well, because after-hours sessions are mostly professional traders and volume is low, higher price volatility may be present. This can make it more difficult to know when to buy or sell. A big deal by a big firm could have a significant impact on a stock’s price.

Limitations by hours

If you decide to trade during pre-market and after-hours sessions, you may be limited in what you can do.

Looking at Charles Schwab’s extended hours overview, there are key differences between standard trading and after-hours trading.During the typical trading day, traders can expect:

• Stock trading.
• To execute many order types and restrictions at any order size.
• A variety of security types, including stocks, options, bonds and mutual funds.
• Traders have different time limits.

Compare that to the brokerage’s after-hours session:

• Transactions take place on an electronic market.
• Only limit orders with a maximum of 25,000 shares in a single order are accepted.
• Most listed and NASDAQ stocks are available.
• Orders are only good for the session in which they are placed and are not good for carryover to the next trading session.

How do I trade after regular hours?

Check with your broker. Most brokers now have access to after-hours trading for all their investors. Some brokers allow limited access, while others may only have access to certain computer networks, resulting in slower order execution speed. As recommended by the SEC, read all disclosure documents before proceeding.

Technological failures

One of the things that investors will have to deal with is related to the system that comes with online trading as a whole. When it comes to trading after hours, there can be delays and delays in order execution. Even worse, your orders may not arrive at all.

conclusion

After-hours trading can have benefits for traders trying to take advantage of expected news or provide a way to enter or exit stocks if unexpected news is announced. However, routine trading after regular hours is not recommended for most traders. Regular trading sessions provide better liquidity and more efficient markets, making all prices better reflect fair value. It is important to understand that different BROKERAGE they have different rules regarding trading hours.