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How After-Market Trading Works (and How to Do It)


You might assume that once the closing bell rings, stock market trading is done for the day. In reality, after-market trading can continue on into the late afternoon and evening. Sometimes it’s actually fairly heavy. Of course, not every brokerage allows for after-market or after-hours trades, but if yours does, it’s important to understand the rules, pros and cons before venturing in. A financial advisor can help you get into the after-market trading game if you aren’t sure where to start.

What Is After-Market Trading?

With most stock exchanges, including the Nasdaq and the New York Stock Exchange, the regular stock trading session stretches from 9:30 a.m. to 4 p.m. ET. As its name indicates, after-market trading begins once the markets are officially closed for the day. In the U.S., this trade window usually lasts from 4 p.m. to around 8 p.m. For early risers, there’s also pre-market trading hours that begin before 9:30 a.m.

After-market trades are completed through electronic communication networks, or ECNs. These frameworks make it possible for buyers and sellers to connect without the aid of a traditional stock exchange. Both individual and institutional investors can gain access to an ECN.

ECN trading is a relatively simple process. You place an order to buy a specific number of shares at a set price. The ECN then searches to see if that number of shares is available at your target price. If the network locates a suitable counterpart, it executes the trade. There is, of course, always the chance that the shares aren’t available, in which case the trade will stall.

Spikes in after-hours trading sometimes focuses on specific sectors. In June 2021, for example, relatively heavy trading occured in a number of consumer discretionary shares. Among them were shares of J.Jill, Fisker and CarLotz. Also, many traders bought call options on crude oil as optimism that the world’s most valuable commodity is on its way to $100 a barrel, which would be a seven-year high.

Do All Brokerages Offer After-Hours Trading?

The short answer is no, after-market trading isn’t a service every brokerage provides. If the brokerage you use does offer it, it’s important to understand the rules for what you can and can’t trade. For example, brokerages usually only allow you to use limit orders to buy, sell or short stocks. Mutual funds, bonds, options and futures can’t be traded during after-hours sessions.

You should also be aware of any extra fees your brokerage may charge for after-hours trades. While standard commission charges are normal when buying and selling, these potential fees will make your trades slightly pricier. This might not make much of a difference if you’re trading on a smaller scale. But if you’re a big spender, another fee can quickly make things add up.

Benefits of Making After-Market Trades

After-Market Trading

There are a couple of reasons you might consider trading after hours. First, rather than being forced to trade within the confines of a schedule, after-market trading allows for increased convenience.

This is especially helpful for those that don’t have the time to monitor the market or make trades during the day. As the late afternoon and early evening approaches, though, after-hours trades can help you get caught up. This allows you to still be an active trader on a schedule that works best for you.

Second, and perhaps more importantly, after-market trades offer an opportunity to take advantage of emerging trends or news events. Let’s say a company announces a merger or release its latest earnings report after regular business hours. By jumping into the after-hours market, you can buy or sell shares in real-time versus having to wait until the next day.

Downsides of Trading After Hours

The act of trading any type of investment always carries a certain amount of risk. There are some unique factors to note, however, when it comes to after-market trading.

Keep in mind that not every investor is trading after hours. When there are fewer people active, you might find it harder to buy or sell at a quick pace. This can result in a wider than normal gap between the highest price offered by buyers (the bid) and the lowest price sellers are offering (the ask). You may also have a harder time converting shares to cash.

Not all stocks are actually able to be traded after hours. So if some breaking news releases, you might be out of luck if that company’s shares are unavailable during after-market sessions. Or, if you’re waiting until the end of the day to trade for the sake of convenience, your choices may be limited.

Volatility is also an issue with trading later in the day. Stocks may react differently to market or political news after hours, possibly resulting in more dramatic price swings. Even worse, a stock may not trade at the same price when the market opens the next day as it did when you bought or sold it after hours. Miscalculations in how a price will move can result in losses, though this doesn’t necessarily have to be the case.

Finally, after-market trading was once exclusively the domain of institutional investors. Individual investors who trade after hours may find themselves going up against these bigger investors, who likely have a deeper well of knowledge to draw from. That could put you at a disadvantage when trying to navigate this unique market.

Bottom Line

After-Market Trading

After-market trading might be worthwhile if you’re looking for more flexibility in building your portfolio or if you simply can’t trade during the day. Before you give it a try, connect with your brokerage to make sure that after-hours trading is an option. If it is, figure out what you can and can’t trade, as well as what fees, if any, might accompany your trades.

Finally, determine if you can stomach the additional risk that comes with after-market trading. A financial advisor can offer specific advice regarding how well your personal investment plans line up with the after-hours market.

Tips for Investing at Any Hour of the Day

  • Investing is a key to increasing your savings for the future, but many people don’t feel comfortable starting on their own. Luckily, finding a financial advisor to work with doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors in your area in five minutes. If you’re ready to be matched with local advisors, get started now.
  • If you’re looking for a brokerage that allows for after-hours trades, take the time to compare the online accounts that are out there. Check for any applicable fees, rules or limitations to ensure the brokerage is a good fit for you.

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