Most of the market changes can occur outside of the market’s normal trading hours of 9:30 a.m. to 4:00 p.m. EST (Eastern Standard Time). Traders can take big profits from Pre-Market and After-Hours Trading .
The often-volatile pre-market trading session is closely watched to get a sense of the market’s direction before the regular market open. Price volatility is driven by influences outside of the regular trading session. Buyers who know how to trade stocks and futures at this time can make huge profits. Investors take stock of the day and make trades that might have been too volatile straight at the close after the market closes.
Pre-Market and After-Hours Trading
The regular market open is gauged by Pre-market and after-market trading. There are several ways to book profits from this trading session.
Buyers can take advantage of news releases and updates. These news releases and updates aren’t available during regular market hours during pre-market trading and after-hours trading sessions.
Financial indicators and earnings releases are examples of news and releases that investors should pay attention to.
Electronic communication networks (ECNs) manage the Pre-market and after-hours trading.
Listed Companies submit their quarterly earnings as earnings announcements at this period of time. Each quarter’s earnings season begins one or two weeks following the quarter’s end. As a result, the majority of corporations report earnings in early to mid-January, April, July, and October. Company typically announces their earnings before the market opens and after the market closes during this time. It produces significant price movements in the underlying stocks outside of regular trading hours.
Having access to extended-hours trading helps a stock trader to react fast. It can be favorable or negative news and maybe profit from the immediate reaction.
Important News Events
Major geopolitical news and announcements come after regular trading hours or on weekends. It potentially produces huge market movements. Unexpected occurrences such as wars and natural disasters might catch the market off guard at any time. Having early access to the market allows you to better position yourself. It also mitigates risk in the market of such unanticipated events.
In the pre-market trading period, economic indicators are important drivers of price activity. Companies announce their Financial announcements usually at 8:30 a.m. EST, one hour before the New York market starts. The market’s reaction to the data can produce significant price changes. It also set the tone for the rest of the day’s trading.
The Employment Situation Summary, released by the Bureau of Labor Statistics on the first Friday of each month at 8:30 a.m. EST, is the market’s most important announcement.
The gross domestic product (GDP), retail sales, and weekly jobless claims are among the other significant market-moving figures announced at 8:30 a.m. EST. Understanding the market reaction might be as simple as looking at analyst expectations for these statistics.
The biggest market changes usually happen when a number considerably exceeds or fails the predicted forecast, resulting in considerable volatility and the associated trading risks and opportunities.
Trading Stocks on Electronic Communications Networks (ECNs)
Electronic communication networks (ECNs) are a stock that allows traders to exchange stocks after regular trading hours. ECNs are electronic trading systems that automatically match buy and sell orders at predetermined prices, allowing major brokerage firms and individual traders to trade without the need for a middleman like an exchange market maker.
The majority of orders executed through ECNs are limit orders, which is beneficial because after-hours trading can have a significant impact on the price of a stock.
Pre-market trading happens from 4 a.m. to 9:30 a.m. EST, and after-hours trading happens from 4 p.m. to 8 p.m. EST on days with a regular session. Many retail brokers will trade during these sessions.
One thing to keep in mind is that when trading outside of regular market hours, liquidity is often substantially reduced. The spreads between bid and offer prices are frequently greater, and the “thin” level of trading can result in increased volatility, with all of the risks and opportunities that entails.
In the pre-market session, the futures market, particularly the benchmark S&P 500 futures contract, should watch carefully to determine market sentiment for the day. In futures contracts, traders buy or sell an asset at a fixed future date and price, such as a physical commodity or a financial instrument.
Futures contracts on financial indexes such as the Dow, Nasdaq, or S&P 500 are known as stock index futures. The E-mini S&P 500 futures contract on the Chicago Mercantile Exchange is the most actively traded stock index future in the world.
E-mini S&P 500 futures, which trade practically 24 hours a day, can predict how the market will trend at the start of the New York session open. Money managers frequently utilize S&P 500 futures to hedge risk over a set period of time by selling the contract short or boosting their stock market exposure by buying it.
A primary market for trading E-mini S&P 500 futures is the high liquidity level, which is available practically 24 hours a day. The spreads between bids and offers are consistently narrow. The spread acts as a barrier to entry into the market. Tight spreads are important since the bigger the spread, the more the transaction must move in your favour to break even.