The trading session is the time slot during which trading occurs during a given day. One trading session corresponds to a single business day on the majority of stock markets, where the main trading session occurs during the day. The opening bell, which indicates that the market is open, marks the start of the session. Similarly, the trading day ends with the closing bell. Most trading takes place during this time of day.
But trading activity isn’t restricted to this time of day. It actually happens after regular business hours, after the market closes. This is known as the after-hours trading session. However, there are a few significant distinctions between the after-hours trading session and the regular trading day. Continue reading to learn more about trading after the market closes, including what to look out for and how to participate in the after-hours session.
The after-hours trading session taking place after the regular market closes can significantly impact stock prices. Several factors contribute to this phenomenon, including:
1 News and Earnings Releases:
Companies often release important news or earnings reports after the market closes. This information can positively or negatively affect the valuation of the security leading to price fluctuations during after-hours trading.
2. Trader Reactions:
Traders may attempt to capitalize on the new information released after hours, buying or selling shares based on their assessment of the impact. This activity can further influence price movements.
3. Lower Trading Volume:
After-hours trading typically involves lower trading volume compared to regular market hours. This reduced liquidity can lead to wider bid-ask spreads and more volatile price swings.
4. Institutional Investor Activity:
Institutional investors often participate in after-hours trading, taking advantage of the lower trading volume and potential price discrepancies. Their actions can also influence the direction of stock prices.
5. Pre-Market Trading Impact:
The after-hours session can also set the stage for pre-market trading the following day. News and price movements during after-hours can influence pre-market orders, potentially leading to further price changes when the regular market opens.
6. Speculative Trading:
Some traders engage in speculative trading during after-hours, attempting to profit from anticipated price movements based on news or other factors. This activity can further contribute to volatility.
7. Short-Term Catalysts:
After-hours trading can be influenced by short-term catalysts, such as analyst upgrades or downgrades, regulatory announcements, or unexpected events related to the company or industry.
8. Technical Analysis:
Technical analysts may use after-hours price movements to identify potential trading opportunities or confirm technical indicators. This can lead to increased trading activity and further price fluctuations.
9. Market Sentiment:
Overall market sentiment can also play a role in after-hours price movements. If the broader market is experiencing a rally or decline, individual stocks may follow suit during after-hours trading.
10. Liquidity Events:
Events that affect a company’s liquidity, such as stock splits or secondary offerings, can also impact after-hours prices. These events can alter the supply and demand dynamics, leading to price adjustments.
In conclusion, various factors can contribute to stocks going up after hours. News and earnings releases, trader reactions, lower trading volume, institutional investor activity, pre-market trading impact, speculative trading, short-term catalysts, technical analysis, market sentiment, and liquidity events all play a role in shaping after-hours price movements. Understanding these factors can help investors make informed decisions about participating in after-hours trading.
Should I trade after hours or wait for the regular trading session?
It truly depends on a variety of elements, such as your trading strategy, risk tolerance, and whether you are entering or leaving a position. While the average investor might prefer to hold off until the regular trading session, a seasoned trader might experiment in the after-hours market in order to close a losing position or gain an advantage when starting a new one. Make sure you are aware of the risks associated with trading after hours and determine whether the advantages outweigh the risks in your particular circumstance.
NYSE (Tapes B and C)
- Preopening: Monday through Friday, 6:30 a.m. ET
- Early trading: Monday through Friday, 7 a. m. to 9:30 a. m. ET.
- Standard trading: Monday through Friday, 9:30 a. m. to 4 p. m. ET.
What is After Hours Trading and Why Do Stocks Sometimes Spike After-Hours? ☝️
FAQ
Is it good if a stock goes up after hours?
Why do stocks shoot up after hours?
What time of day is stock highest?
What is the 10 am rule in stock trading?
Does after-hours trading affect stock prices?
After-hours trading refers to trading in stocks and ETFs that occurs after the regular market closes. It allows investors to buy and sell securities outside of normal trading hours for a variety of purposes, including responding to news or data releases that occur after the close.
Why do stock prices change during after-hours & premarket trading?
During after-hours and premarket trading, stock prices change for multiple factors. Company-specific factors, such as earnings announcements, can affect prices, as can global developments. Global news tends to have a more pronounced effect in premarket trading, reflecting Asian and European markets.
What happens during after-hours trading?
Keep in mind that after-hours trading can vary by broker. But as there are fewer participants trading during after-hours, the trading volume can be significantly less than the regular trading day. This lower volume often leads to a separation in the bid and ask prices, which is referred to as the wider bid-ask spread.
Why is after-hours trading more risky than regular hours?
After-hours trading is more volatile and riskier than trading during the exchange’s regular hours because of fewer participants. As a result, trading volumes and liquidity may be far lower than during regular hours.