What is after hours stock trading ?
After hours stock trades
could be very risky
After hours stock trading and pre-market stock trading are jointly known as extended trading hours possibilities. But what does it mean? And how is stock market after hours trading and pre-market trading possible, and can they be profitable?Standard hours for stock trading First, the basic knowledge is that there are standard stock market
trading hours
. During these standard hours everything works under the rules offered by stock exchanges. Take U.S. stock market trading hours as an example. They’re from 9:30 a.m. till 4:00 p.m. Eastern time (New York time).
Extended hours for stock trading But it’s also possible to enter orders and execute trades outside these trading hours. There are several marketplaces connected to the main stock exchanges or parts of stock exchanges that allow entry and execution orders during extended trading hours. Pre-market stock trading hours are typically from 8:00 a.m. till 9:15 a.m. ET (New York time) for NASDAQ and NYSE stocks. But using NYSE Arca ECN you can enter and execute orders from 4:00 a.m. to 9:30 a.m. ET. After hours stock market trading can be done from 4.00 p.m. till 8:00 p.m. on the NYSE and till 6:30 p.m. on NASDAQ.
I do not do regular trading during these extended stock market trading hours. Market prices are not as stable; also liquidity is not so good.No price is guaranteed, and price can be manipulated a lot (by the news, etc.).
My Tip :
I like to use some huge price movements in my favor to exit from position or sell part of my position during pre-market trading hours. I incorporated this rule into
my stock trading strategy.
Can such stock trades be profitable?
I personally know traders who use special event driven momentum trading strategy and trade mostly during these hours – and are profitable. But this type of trading is very specific, and strategy must be learned and perfected.
Why are after hours stock trades risky ?
There is big risk in extended hours stock trading. Why ?There is not guaranteed liquidity in extended trading hours. Bid / Ask spread could be very wide and could be very complicated to open or close stock trades. I personally do not recommend to open position during these hours. Only option is to exit position as mentioned above.
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