We’re ‘extending’ a little gesture to our customers with extended trading hours
April 13 2022 - Team Stockal
In our efforts to constantly add value for your customers, we are thrilled to announce that we will be adding the functionality of extended hours trading on our platform. Stockal’s extended trading hours now will allow you to trade pre-market and post-market outside regular U.S. market hours.
While regular stock market trading hours for the New York Stock Exchange and the Nasdaq are from 9:30 a.m. to 4 p.m. EST, with Stockal’s extended trading house, you can buy and sell limit order stocks before the market opens or after it closes within the below timings:
Pre Market hours: 4 AM – 9:30 AM EST (1:30 PM – 7:00 PM IST)
Post Market hours: 4 PM EST – 8:00 PM EST (1:30 AM – 5:30 AM IST)
That gives you over 9 hours of additional time to trade on the platform! If you’re keen on learning more, do read on. We’ve addressed the basics right below.
What exactly is extended hours trading?
As the name suggests, extended trading is trading conducted by electronic networks either before or after the regular trading hours of the listing exchange.
Trading outside of normal hours used to be limited to institutional investors and high-net-worth individuals, however, Electronic Communication Networks (ECNs) have democratised extended hours trading making it possible for the average investor to place orders for after-hour execution.
Extended hours trading are handy if you want to act quickly on news like company earnings releases and events that occur when the exchange is closed. This also makes it an excellent indicator for predicting the open market direction. If you want to buy or sell as soon as possible based on the news, you’ll simply need to place an order for after-hours trading.
The majority of extended trades tend to occur right around regular trading hours. This is because most news that affects investors occurs either shortly before or shortly after the exchanges open or close. If there is a major news event that occurs before the exchange opens, or after the exchange closes, there can be significant extended trading volume. Although, on most days volume is typically lower in the extended hours as compared to the hours the exchange is open.
How does after-hours trading work?
After-hours trading is a bit different from regular trading on the exchanges throughout the day. Instead of placing your order on the exchange, your order goes to the ECN. The ECN matches orders based on limit prices. Additionally, after-hours orders are only good for that session.
If users place a LIMIT order to be executed during extended hours on Stockal – it will get cancelled by the end of day if not executed. Orders placed after 6PM EST will get cancelled by the T+1 day, if not executed. You would need to put in another order when trading opens the next day if you’re still interested in the stock.
To carry out an after-hours trade, you would need to log in to your Stockal account and select the stock you want to buy. You could then place a LIMIT order.
Stockal then sends your order to the ECN it uses for after-hours trading. The ECN attempts to match your order to a corresponding buy or sell order on the network. If it can match your order, the trade is executed, and settlement times are the same as during regular sessions.
Extended trading hours vary based on which asset or security is being traded. Lower volumes in extended hours could lead to increased risk and volatility, although this can also present opportunities for the astute trader. While some stocks and ETFs do significant volume in the pre- and post-market, other stocks do very little or none.
What are the risks to consider with after-hours trading?
After-hours trading comes with several risks that are typically not associated with trading on an exchange during regular trading sessions. These include:
1. Limited liquidity
Extended hours have less trading volume than regular hours, which could make it difficult to execute trades. Some stocks may not trade at all during extended hours.
2. Large spreads
Less trading volume often translates to wider bid-ask spreads, which can adversely affect the market price for execution, making it harder to execute orders at favourable prices.
3. Increased volatility
Less trading volume often creates an environment for greater volatility given the wider bid-ask spreads. Prices can move drastically in a short amount of time.
4. Uncertain prices
The price of a stock trading outside of regular hours may not closely match the price during regular hours.
5. Professional competition
Many extended trading participants are large institutional investors, such as mutual funds, that have access to more resources.
Extended trading opportunities – on the positive side
All the risk of extended-hours trading can also be opportunities if a participant is able to get on the right side of the action. For example, a stock may have closed at $57, yet placing a bid to buy at $56 or $55 may get triggered in extended trading since there are fewer bids out and if someone wants to sell they may sell to $56 or $55 even though the price was $57 only minutes ago. The stock may even fill orders at $54 and $60, for example, before the next day around $57 again.
Start your after-hours trading now
The bottom line is that after-hours trading is possible, and can help you react to earnings reports and other news that takes place outside of normal market hours. Be sure to do your homework before getting started.