Stock Trading Terminology: After-Hours Trading
Most people trade during normal trading hours, which is 9:30a ET to 4:00p ET for the US markets.
But, trading happens outside these hours and is known as the after-market session or extended trading. After-hours trading is done through electronic communication networks (ECNs) that are programmed to match buyers and sellers automatically without the use of an exchange.
The after-hours trading can be done in the morning between 8:00a -9:30a ET and in the afternoon from 4:00p -8:00p ET. Most brokers allow traders to participate but may only allow you to place limit orders.
Trading during these frames can be high risk as there is a lot less volume resulting in higher spreads and more volatile moves.
This is not a place for new traders to be putting on risk and is best suited for experienced traders who have a higher tolerance for risk, and the capital to back it up. It is for savvy and professional traders.
Aside from the major risks associated with trading in the after-hours, there are some major benefits too. Major news events such as earnings occur during the after-market session and create excellent opportunities to take advantage of.
Earning and economic data that comes out in the morning usually before the market opens that can provide some great trading opportunities.
These event are more favorable to trade when they 1st come out as opposed to waiting till the market opens and the news has been digested and traded on.
Trading in the pre or post market is risky and something new traders should avoid doing.
Spreads are usually a lot wider and volume can be very light making it a risky time to trade as you will have to increase your risk parameters.
If trading is new to you then your best bet is to learn the market when things are not so fast. It’s easy to get bit in after-hours trading and that is not something you want to have happen when you are starting out in the trading profession.