What is After-hours Trading & How to Trade After-hours? (2024)

After-hours trading refers to the extended trading session that takes place after the official closing of a stock exchange. After-hours trading sessions vary by exchange, but they typically extend for a few hours following the official market closing time.

After-hours trading provides market participants with the flexibility to react to news events, corporate earnings reports, and other developments that may affect asset prices after the closing bell.

The after-hours trading session typically begins shortly after the official market closing time. Most U.S. stock exchanges ring the closing bell at 4:00 PM Eastern Time (ET). After-hours trading can commence within minutes or shortly after the regular market closes, allowing investors and traders to continue trading beyond the official closing bell.

The exact start time of the after-hours session can vary slightly between different exchanges and trading platforms. While some platforms may begin after-hours trading immediately at 4:00 PM ET, others may start a bit later, usually within the next half-hour or so.

The timing for the after-hours sessions at the New York Stock Exchange and the Nasdaq Stock Market are highlighted below:

New York Stock Exchange after-hours trading

  • After-hours trading takes place after the markets have closed. Post-market trading usually takes place from 4 p.m. to 8 p.m. Eastern time (ET).

.

Nasdaq Stock Market after-hours trading

  • After-hours trading takes place after the markets have closed. Post-market trading usually takes place from 4 p.m. to 8 p.m. Eastern time (ET).

During after-hours trading, liquidity tends to be lower, and trading volumes reduced as compared to regular hours. This can result in wider bid-ask spreads and limited order flow, making it important for traders to use limit orders and exercise caution when executing trades. The lower liquidity can also lead to increased price volatility, especially in response to news events, making risk management a critical aspect of pre-market trading.

Not all securities are available for trading during after-hours sessions, and eligibility criteria may vary by exchange or platform. Traders should check which specific assets are accessible during these sessions. Additionally, some order types commonly used during regular hours may not be available during pre-market trading, which further emphasizes the need for traders to adapt their strategies.

Some of the common strategies utilized during the after-hours sessions are highlighted below:

  • Gap Trading: Taking advantage of price gaps caused by overnight news or events.

  • Earnings Plays: Trading based on earnings reports released before the market opens, or after the market closes.

  • News Breakouts/Momentum: Identifying and trading stocks that react strongly to breaking news during the pre-market session.

  • Scalping: Identifying and profiting from small price movements in assets over a very brief time frame. Scalping opportunities may sometimes present themselves during the extended trading sessions.

In general, after-hours trading sessions offer a window of opportunity for those seeking to stay informed and nimble in the face of financial developments that occur outside of regular trading hours. These sessions cater to investors and traders looking to react to news, earnings reports, and global events, while also allowing for a more flexible trading schedule.

But investors and traders active in the after-hours sessions should be mindful of the lower liquidity, heightened volatility, and potential cost implications that come with trading in the extended sessions, and should prepare their strategic approach and risk management plan before joining these sessions.

What is After-hours Trading & How to Trade After-hours? (2024)
Top Articles
Latest Posts
Article information

Author: Terence Hammes MD

Last Updated:

Views: 5363

Rating: 4.9 / 5 (69 voted)

Reviews: 84% of readers found this page helpful

Author information

Name: Terence Hammes MD

Birthday: 1992-04-11

Address: Suite 408 9446 Mercy Mews, West Roxie, CT 04904

Phone: +50312511349175

Job: Product Consulting Liaison

Hobby: Jogging, Motor sports, Nordic skating, Jigsaw puzzles, Bird watching, Nordic skating, Sculpting

Introduction: My name is Terence Hammes MD, I am a inexpensive, energetic, jolly, faithful, cheerful, proud, rich person who loves writing and wants to share my knowledge and understanding with you.