Known as pre-market and after-hours trading, these two sessions open up more possibilities for both profit and risk. Regular stock market trading hours are 9: Trading outside regular stock market hours of 9: This trading occurs on private trading systems, known as electronic communication networks or ECNs.
Extended Hours Trading consists of Pre-market and After-hours trading. Pre-market trading is trading that occurs before stock market opens at 9: Many brokerage firms offer it. The most common time period for it is 8: After-hours trading is trading that occurs after stock market closes at 4: Majority of online brokers offer After-hours trading, and the most common time period for it is from 4: Extended Hours Trading has very low volume comparing to regular market hours trading.
Because of that, investors should almost never use market orders and instead use limit orders when trading during that time. In the table above you will find the list of online stock brokerage firms that offer after hours and pre-market trading along with time periods they set for it. As you see, trading at extended hours is extremely expensive with some of these firms. Extended-Hours Trading The equity market in the U. These time slots are just for professional traders.
Home gamers can participate, too. Keep in mind that brokers sometimes impose additional restrictions during these trading times. Fidelity, for example, requires all orders to be submitted as limit orders. Charles Schwab places a maximum of 5, shares on extended-hours trades. In order to gain the privilege of trading during extended hours, you may have to make a special request to your broker, talk to a company representative over the phone, or sign a form stating that you have read and agree to an Electronic Communication Network ECN agreement.
There is less trading during these times, which means the bid-ask spread for a security will be larger. If you use a limit order during extended hours to protect the price you want, the order may not be filled, or it may only be filled partially.
Pre-market and after-hours periods also tend to have significantly higher volatility. Traders during these times are often professional money managers, so the people you would be trading against tend to be highly skilled and experienced. This is very important to keep in mind. If you want the order to execute, you may have to submit it again during the regular session.
Be sure to check with your broker to determine what its policy is on this important issue. Advantages Of Extended-Hours Trading Despite the hazards of extended hours, the two sessions create important opportunities.
For example, companies often report their earnings after the market closes. The ability to trade a stock before the regular period opens the following morning allows you to legally get in on the price movement, whether up or down, before other traders do in the regular session. Economic indicators are sometimes released by the federal government in the morning, before 8: These news releases can and do affect equity prices, sometimes significantly. Placing trades before the regular session reacts can be a profitable strategy.
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