From the hours of 9:30 a.m. to 4 p.m., the New York Stock Exchange (NYSE) trades on over $5.1 trillion dollars worth of transactions. But did you know that once the stock market closes, it’s not “truly” closed until the next day? Unsurprisingly the stock exchange has an entire contingent of savvy investors and operators who choose to invest after the stock market changes, with a technique known as “after-hours trading.”

After-hours trading confers several advantages to investors who are brave enough to trade after call, but those benefits are only available to people taking the inherent risk. Interested in learning more about after-hours trading? Read on to learn more, or get in touch with us at TradeUP to start investing whenever you want, from wherever you want.

What Is Regular-Hour Trading?

Regular-hour trading is pretty straightforward: it’s trading that happens during the stock market’s regular hours, which are between the hours of 9:30 a.m. and 4 p.m. EST, Monday through Friday. This window of time is typically when people most people trade their assets on the market, primarily because trading volume is so heavy.

What is After-Hours Trading?

After-hours trading refers to any trading on the stock exchange that happens outside of normal hours of 9:30 a.m. to 4 p.m. EST, but can typically be divided up into two different parts of the day: the post-market trading session, which happens from 4 to 8 p.m. EST, and the premarket trading session, which takes place before the market opens.

Once the domain of institutional investors, after-hours trading became popular in September of 1999, with large brokers like Charles Schwab, Fidelity, and TD Ameritrade now offering the service to average investors.

With the help of mobile app trading from major industry players like TradeUp, people now have even greater access to after-hours trading. Everything you need to trade on the stock market — regardless of volume, or time of day — is right at your fingertips, with rapid ordering, efficient market ordering, and more, to keep you agile in today’s volatile market.

How After-Hours Trading Works

With after-hours trading, your order goes through electronic communication networks (ECNs) that your broker works with, as opposed to going directly through the exchange. Most notably, investors can only use limited orders to buy or sell shares. The ECN then matches the order based on limited prices. After-hours orders are only good for that session. If you’re still interested in the stock tomorrow, you’ll have to put in another money order for that day.

What Can You Do During Pre and Post-Market Trading Hours?

During pre and post-market trading hours, you have many options. For one, you can financially react to company announcements, which are typically put out at the end of the day. Company news announcements can often trigger a knee-jerk reaction-type response from some investors,  which can lead to a misrepresentation of the company’s stock value during trading hours. For this reason, most companies opt to put out the news at the end of the day, where after-hours traders can take advantage of it.

When you trade during after-market hours, you’re also limiting the amount of money you can trade on, as most brokerage firms only accept limit orders in after-hours trading to protect investors from unexpectedly bad prices. These bad prices may come as a result of lower trading volumes and wider spreads during the after-hours trading session.

The Five Advantages of After-Hours Trading

After-market trading confers a number of benefits and advantages that go beyond having more time to trade.

  • Increased Liquidity — The most important advantage of after-market trading is increased liquidity. There are more traders active during extended hours, which results in tighter bid-ask spreads.
  • Reactivity — You can react to company news, which almost always comes out after the market closes in order to protect a company’s true stock value from knee-jerk reactions.
  • More Volatility — This can be a double-edged sword. Increased volatility lends itself to a high return on investment, but the volatility itself means that you could also lose those gains just as fast. After-hours trading provides more opportunities for active traders to profit from price movements.
  • Access to Other Markets — The U.S. markets close at 4 p.m. EST, but other global markets are open ‘round the clock, making after-hours trading more lucrative.
  • Less-Crowded Markets — Finally, another advantage of after-market trading is the fact that the markets are less crowded. This can be a big advantage if you like to trade without the interference of other traders.

 The Dangers of After-Hours Trading

While after-hours trading is becoming more and more common throughout the world of investors, it’s not without its risks! Unfortunately, after-hours trading is a way for insiders to manipulate stock prices to their advantage, and your detriment. This could lead to drastically inflated or deflated stock prices, meaning you’re not purchasing or selling a stock at its maximum value. Illegal? Absolutely. But does it happen? Yes.

Additionally, there is less liquidity in the market, meaning it can be difficult to get in and out of trades, and the amount traded might be well beyond what you’re willing to pay. We call this illiquidity, which means there might not be enough buyers and sellers to match the trades

After-hours trading, once the strategy of many institutional investors, is now something that millions of people can take advantage of. During times of extreme market volatility, after-hours trading can provide a safe harbor for investors who are looking to react to economic events that took place during the day. It can give traders access to international markets, rather than keeping them tied to domestic, and though the volatility can sometimes be high, some prefer this high volatility.

But to get started with after-hours trading you’ll need some skin in the game in the first place. With TradeUP’s mobile app, you can trade stocks whenever you want, wherever, with minimal cost to you. So enjoy peak hours prosperity, or make moves once the markets close with TradeUP. Learn more about investing today!