If you are an active trader, you may have heard about after hours trading. This is a type of trading that takes place outside of regular market hours. After hours trading can be a great way to capitalize on market movements that occur outside of the normal trading hours. In this article, we will explore what after hours trading is and when it starts.
What is After Hours Trading?
After hours trading refers to the buying and selling of securities outside of regular trading hours. Most stock exchanges have specific times when trading takes place, usually between 9:30 a.m. and 4:00 p.m. Eastern Time. After hours trading allows traders to buy and sell securities before or after these regular trading hours.
Types of After Hours Trading
There are two main types of after hours trading: pre-market and post-market. Pre-market trading takes place before regular trading hours, usually between 4:00 a.m. and 9:30 a.m. Eastern Time. Post-market trading takes place after regular trading hours, usually between 4:00 p.m. and 8:00 p.m. Eastern Time.
When Does After Hours Trading Start?
After hours trading starts immediately after the regular trading session ends. For most stock exchanges, this means after 4:00 p.m. Eastern Time. However, some exchanges have different hours. For example, the NYSE Arca Equities exchange starts after hours trading at 4:00 p.m. Eastern Time, while the CME Group starts after hours trading at 5:00 p.m. Eastern Time.
How Long Does After Hours Trading Last?
After hours trading usually lasts for a few hours, depending on the exchange. For example, the NYSE Arca Equities exchange allows after hours trading until 8:00 p.m. Eastern Time. The CME Group allows after hours trading until 5:00 p.m. Central Time.
What Securities Can You Trade After Hours?
Most securities can be traded after hours, including stocks, options, and exchange-traded funds (ETFs). However, not all securities are available for after hours trading. It is important to check with your broker to see which securities are available for after hours trading.
Benefits of After Hours Trading
There are several benefits to after hours trading. First, after hours trading allows traders to react to news and events that occur outside of regular trading hours. For example, if a company announces earnings after the market closes, traders can react to the news by buying or selling the stock in after hours trading. Second, after hours trading can provide increased liquidity. During regular trading hours, there may be a lot of competition for certain stocks, which can lead to higher prices. After hours trading allows traders to buy and sell stocks without as much competition, which can result in better prices. Finally, after hours trading can be a great way to manage risk. For example, if a trader has a position in a stock that is experiencing a lot of volatility, they can use after hours trading to adjust their position and manage their risk.
Drawbacks of After Hours Trading
While after hours trading can be beneficial, there are also some drawbacks to consider. First, after hours trading can be more volatile than regular trading hours. This is because there is less liquidity and fewer traders, which can lead to larger price swings. Second, after hours trading can be more expensive. Some brokers charge higher fees for after hours trading, which can eat into profits. Finally, after hours trading can be riskier. Because there are fewer traders and less liquidity, it can be harder to get out of a position if things go wrong.
After hours trading can be a great way to capitalize on market movements that occur outside of regular trading hours. It allows traders to react to news and events, provides increased liquidity, and can help manage risk. However, it is important to be aware of the drawbacks, such as increased volatility, higher fees, and increased risk. If you are considering after hours trading, be sure to do your research and work with a reputable broker.