Everything You Need to Know About Extended Hours Trading

Major exchanges, such as the New York Stock Exchange (NYSE) and NASDAQ, have standard trading hours. However, there is a way to invest outside those hours and capitalize on market trends. 

Here’s everything you need to know about extended-hours trading:

What is Extended-Hours Trading

Extended-hours trading refers to trading that occurs after regular market hours. The normal trading session begins at 9:30 AM and closes at 4:30 PM ET. Premarket trading hours range from 7:00 AM to 9:25 AM, whereas after-hours trading can last until 8:00 PM ET. Together, pre-market and after-hours trading is known as extended hours trading. 

During pre-market and after-hours trading sessions, investors can place orders to buy or sell securities. However, the rules and regulations might differ from those during normal market hours. You might also face less trading volume for some stocks, as well as high competition. 

Investors engage in after-hours trading for numerous reasons. They might prefer trading with fewer market participants or wish to react quickly to company income releases and other news. For many investors, trading after hours is the only convenient option due to a hectic schedule.

How Does Extended-Hours Trading Work

After-hours trading was previously reserved for wealthy families and large corporations. In the 1990s, when Electronic Communication Networks (ECNs) were introduced, extended-hours trading became readily available.  

To trade after hours, you need to have an account with a brokerage firm that offers this service. Each brokerage firm has varying hours. For example, SoFi supports extended trading hours for 30 minutes before the market opens and four hours after the market closes. 

You can place an order through your brokerage firm’s online platform. ECNs automatically match and sell orders, ensuring a smooth and seamless trading experience. Get detailed information about after-hours trading from your brokerage firm, including their hours, fees, and available order types. 

Benefits of After-hours Trading

There are numerous benefits of after-hours trading, including:

Flexibility

If you’re an investor living outside the U.S., after-hours trading can offer convenience. It gives you the freedom to trade on your schedule and ensure a hassle-free experience. 

Price Opportunity

Off-peak trading hours often bring appealing stock prices. If a stock temporarily moves to an advantageous level after market closure, you can benefit from this fluctuation. 

Quick Reaction

Extended-hours trading gives investors the opportunity to respond immediately to late-breaking news. It could be a company’s earning announcement, a CEO stepping down, or unexpected market movements. Unlike traditional investors who would have to wait till the next day to reach, you can trade immediately and take advantage of meaningful price swings. 

Beneficial for Dividend Stock Investors

After-hours trading is especially beneficial for dividend stock investors, who might have missed their chance to buy a stock during standard market hours. The investor can buy the stock after hours to be eligible for the dividend. 

In addition to the benefits, there are several risks associated with after-hours trading, such as a lack of liquidity or high volatility. Therefore, consider your investment goals, risk tolerance, and trading style before participating in after-hours trading. 

also read: Exploring the Tools You Need for Accurate Ad Analysis