A lot of people go to work at 9:45 am and work until 4 pm. This is the normal time for the New York Stock Exchange and Nasdaq to trade stocks. You may still be able to buy and sell stocks after the market closes, which is called “after-hours trading.” This type of trading is called “after-market trading.”
Stock Trading After Business Hours
During after-hours trading, you can buy or sell stocks during times when the stock market isn’t open. Between 4 p.m. and 8 p.m. ET, most people in the U.S. trade after-hours.
Trading outside of normal business hours used to be only for big investors and people with a lot of money. Now, thanks to technology, the average person can place orders for after-hours execution.
As soon as a company makes an earnings report or other important news, after-hours trading lets investors make decisions about how to move their money. Prices can go up and down a lot when an earnings report comes out or a CEO steps down. To buy or sell right away based on the news, you’ll need to place an order for after-hours trading.
What happens when people trade in the stock market after business hours?
After-hours trading isn’t the same as trading on the exchanges during the day. It’s a little different. Instead of placing your order on the exchange, your order goes to ECN(an electronic communication network). This is where your order is sent. That has some limitations and risks that aren’t the same as trading on the Nasdaq or the New York Stock Exchange.
People can only use limit orders to buy or sell shares. The ECN matches orders based on the prices that people want to pay for them. Also, after-hours orders are only good for that one time. To keep the stock, you’ll have to put in a new order when trading starts the next day.
If you want to trade after-hours, your broker sends your order to the ECN that it works with. The ECN tries to match your order to a buy or sell order on the network. In this case, if you put in an order to buy 100 shares of XYZ for $50 each, the ECN will try and find an order to sell at least 100 shares of XYZ for $50. During regular trading hours, the trade is done, and the settlement times are the same.
Risks of After Hours Trading
It comes with a lot of risks that aren’t the same as trading on an exchange during normal trading hours.
There are a lot of ECNs used by different financial institutions to trade after-hours, but your broker will only let you use one of them. During a normal trading session, you’ll get the best price from a lot of different places. But if you go to an after-hours session, you can only find prices on one network.
Even though you can only trade on the ECN that your broker uses, there are fewer people on the market at night. As a result, most stocks aren’t very easy to buy or sell. Because of this, there are bigger bid-ask spreads and more risk that your order won’t be executed.
In the after-hours session, a stock will move all over the place because everyone is trying to react to the same piece of news at the same time. The market is trying to process the news and come up with a new price for the stock. That can make it hard for a normal person to figure out whether or not their limit order will be able to go through. It’s also possible that you might be able to get a better deal on your next trade in the regular market.
After-hours trading is possible, and it can help you react to earnings reports and other news that happens outside of normal market hours, like when the stock market is closed. However, each brokerage is a little different, so make sure to do your research before you start.