Novice stock traders be aware that the stock market has regular trading hours. Unless it is a public holiday, the market is open from 9:30 a.m. to 4:00 p.m. Monday to Friday.Billions of stocks are traded on U.S. markets alone, making them highly liquid and efficient.

What new traders may not know is sotck exchange is also open before and after normal trading hours. Pre- and post-market trading sessions allow investors to trade stocks between 4 a.m. and 9:30 a.m. during the pre-market session, and between 4 p.m. and 8 p.m. 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, raising other issues that traders should consider before trading. trade outside of the normal day. Can you make money trading before or after the bell? It’s possible, but you have to do your research first.

React to company announcements

Companies take a strategic approach to 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 significant knee-jerk reaction that misrepresents the true value of their shares. If a company announced its last quarter results and they were worse than expected, a large-scale exit from the stock could result in unjustified large losses.

But the value of the stock can still change even when the market is not open. Investors will want to access it 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, allowing the stock price to better reflect its fair value. And if you’ve already reached this point, it may be too late to make a trade.

Economic indicators

Many economic indicators are published at 8:30 a.m., one hour before the start of trading in New York. The market’s reaction to these indicators can cause significant price movements and, therefore, set the tone for the trading day.

For example, the employment report released by the U.S. Bureau of Labor Statistics (BLS) – released on the first Friday of each month – has one of the biggest impacts on the market. When released data is higher or lower than expected, traders can expect volatility in the market.

Liquidity Limits

In the past, trading before and after hours This used to be one of the benefits of being an institutional investor. Retail investors did not have access, but that has changed since the markets transitioned to computerized trading. Retail investors now have access to these markets, but does it make sense to trade in these after-hours sessions?

The Securities and Exchange Commission (SECOND) wants you to know a few facts before trading after hours. First, these markets are less liquid. Additionally, since there are far fewer people trading, you may not be able to sell your shares. If the earnings announcement is worse than expected and you want to sell your shares quickly, you may not be able to do so, especially with smaller companies that are not blue-chip.

Wider Spreads, Higher Volatility

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

Finally, because sessions outside normal hours are largely made up of professional traders and volume is low, greater price volatility may be present. This can make it more difficult to know when to buy or sell. A major transaction by a large company could have a significant impact on a stock’s price.

After-hours limits

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

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

• Trading on the stock exchanges.
• To execute many order types and restrictions, regardless of order size.
• A variety of security types including stocks, options, bonds and mutual funds.
• Traders have different time frames.

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

• Trading is done via an electronic market.
• Only limit orders are accepted with a maximum of 25,000 shares per order.
• Most listed and NASDAQ securities are available.
• Orders are only valid for the particular session in which they are placed and cannot be carried over to the next trading session.

How can I trade after 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, slowing down the speed of order execution. As the SEC advises, read all disclosure documents before proceeding.

Technology issues

One of the things that investors will have to deal with is related to the system, which concerns online trading as a whole. When it comes to after-hours trading, there may be lags and delays in the execution of your orders. Worse yet, your orders may not be processed at all.

The essentials

After-hours trading can provide advantages for traders trying to profit from expected news, or can provide a way to enter or exit the stock if unexpected news is announced. Nonetheless, routine after-hours trading is not recommended for most traders. Regular trading sessions provide better liquidity and more efficient markets, making all prices more representative of their fair value. It is important to understand that it is different brokerage houses have different rules on trading hours.