About Extended-Hours Trading

A little more than a decade ago only professional traders and institutions could trade outside of the regular market hours of 9:30 a.m. to 4:00 p.m. ET. (Imagine that!) But now individual investors have the ability to trade both before the regular session begins and after it ends in addition to the regular session each business day. (Check with your specific broker to see whether it offers extended-hours trading and what you need to do to qualify.)

Trading before and after normal daytime market hours gives you an opportunity to trade when it accommodates your schedule and lets you trade alongside the pros. But, extended-hours trading works differently than regular-day trading—and there are a few additional risks you need to be aware of—so becoming educated about the process and the requirements of your brokerage firm is a necessity. Armed with MidnightTrader's real-time news and analysis services, you’ll be better prepared to trade effectively before, during and after the closing bell.

Why Trade in the Extended-Hours?

While most major stock exchanges close before many people leave work, there is rarely enough time to find, research, discuss with your family and execute a trade with your broker. Frequently, events that make an investment attractive happen after the exchanges close. For example, 90% of all corporate earnings reports are released outside of regular market hours.

  • With access to extended-hours trading, you can invest on your own schedule and at your own pace. Extended-hours trading access gives you the ability to
  • Research and act on your investment decisions during the evening or early morning from the privacy of your home
  • Trade alongside mutual fund managers and other investment pros
  • React to late-breaking corporate news that affects your portfolio
  • Have time to discuss possible investments with your family, friends or broker
  • React to news and events that happen overseas or after the NASDAQ and New York Stock Exchange (NYSE) close

What Are the Additional Risks?

As with trading during regular hours, the services brokerage firms offer during extended hours will vary. Always consult your broker or check its Web site for detailed information about trading after-hours. The Securities and Exchange Commission (SEC) identifies the following risks to be aware of with respect to extended-hours trading.
  • Inability to see or act upon quotes: Some firms let investors view quotes only from the single trading system the firm uses for after-hours trades. Ask your broker about its policy.
  • Lack of liquidity: During regular trading hours, buyers and sellers typically can trade readily with one another. Trading volume in the extended hours might be less (or none at all) for some stocks, making it harder to execute some of your trades.
  • Larger quote spreads: Less trading activity also can mean wider spreads between the bid and ask prices. You might find it more difficult to get your order executed or to get as favorable a price as you might get during regular market hours.
  • Price volatility: You might find greater price fluctuations than you see during regular trading hours.
  • Uncertain prices: The prices of some stocks traded during the after-hours session may not reflect the prices of those stocks during regular hours, either at the end of the regular trading session or at the opening of regular trading the next business day.
  • Bias toward limit orders: Many electronic trading systems accept only limit orders, where you enter a price at which you’d like your order executed. If the market moves away from your price, your order will not be executed. Check with your broker for details about how it handles this situation.
  • Competition with professional traders: Many of the after-hours traders are professionals with large institutions that have access to more information than individual investors.
  • Computer delays: As with regular-session online trading, during extended hours you might encounter delays or failures in getting your order executed, canceled or changed. Be aware of how your broker handles such situations.

MidnightTrader—Your Information Resource for Extended-Hours Trading

MidnightTrader empowers you with access to live, streaming in-depth regular-session and extended-hours trading information. Our proprietary market news, analytics and quantitative models coupled with our passionate interest in equity trading deliver distinct advantages to extended-hours traders:
  • Industry-recognized leadership in extended-hours coverage
  • Decades of thought leadership and market experience underpinning everything we do
  • Proprietary information no other financial media service can match
  • Seasoned editors and analysts with exceptional expertise
  • Time-tested and dynamic new products that capitalize on the latest technologies
  • Unequalled commitment to exceptional customer service

Get the edge today—sign up for a free trial and start putting MidnightTrader resources to work for you.