Day + Ext Trading Hours Order Overview
You may be new to the stock market or perhaps you’ve been trading for some time and noticed some brokers offer extended hours trading but are not sure what this is or when to use it. This article will walk you through what extended hours trading is and show some example of how to take advantage of it in your Ameritrade or Firstrade accounts.
What is Extended Hours Trading?
The U.S. stock market is open Monday through Friday from 9:30AM to 4:00PM EST, which gives market participants six and a half hours of trading time each day. Many brokers, Ameritrade and Firstrade included, offer their clients the ability to place trades for many stocks outside of these standard trading hours, known as extended hours trading. The extra hours can vary a bit depending on the broker but Ameritrade and Firstrade both offer extended hours trading in the morning from 8:00AM to market open and then in the evening from market close to 8:00PM. Additionally, Ameritrade also offers round’ the clock trading (24 hours a day) Monday through Friday for select ETFs.
How Do I Place a Day + Ext Order on Ameritrade?
To place an order during extended hours trading in your Ameritrade account, you will enter the order details like you would during standard market hours (i.e. ticker, quantity of shares, etc.). For time-in-force you want to select either “Day + ext.” or “GTC + ext.”. The day + ext. version means that your order will be active that day from 8:00AM until 8:00PM, and GTC + ext. means that your order will be good for those same hours, but will stay open on each subsequent day until it is either filled or the order expiration date is reached. You will also notice that you cannot place market orders during extended hours trading; you must choose a limit order and indicate a limit price (we’ll discuss why later).
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How Do I Place a Day + Ext Order on Firstrade?
Using the same example, let’s say we want to buy 100 shares of SPY during extended hours trading on Firstrade. We would create the below trade ticket, which is very similar to what we did on Ameritrade, except the order types are a little different. You can choose from Pre Mkt, After Mkt, or Day+EXT – we’ll walk through the differences between these three.
Pre Mkt means your order will be active from 8:00AM to 9:25AM that day and will be cancelled if it’s not executed within these hours. Similarly, an After Mkt order will be active only that day between the hours of 4:05PM and 8:00PM. A Day+EXT order will be active for the entire normal market session and extended session, from 8:00AM to 8:00PM for that day only. If it’s not executed during these hours it will be cancelled. And just as with Ameritrade, you Firstrade extended hours order must be a limit order.
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Benefits of Extended Hours Trading
The ability to place orders outside of normal market hours is without a debt a great option to have because it gives you the flexibility to act and react faster than others who may be constrained to the standard market session. This option is perhaps most useful when breaking or significant news affecting your positions comes out before or after the normal trading session. Being able to adjust your position quickly could help you secure profits or avoid further losses as opposed to waiting until the regular trading session begins and when the stock price is potentially very different.
Risks of Extended Hours Trading
Despite the benefits of extended hours trading, the biggest downside is the lower liquidity. There are far fewer market participants placing trades (and therefore also taking the opposite side of your trades) outside of normal market hours, which often leads to higher bid/ask spreads and more volatility when impacting news is announced.
Day + Ext Trading Hours Order Conclusion
To summarize, despite the lower liquidity and higher volatility that is common outside of normal market hours, having the ability to act and react outside of the normal 9:30AM to 4:00PM timeframe is a valuable option to keep in your back pocket. You never know when the outlook for your investments could change dramatically and instantly, but having the ability to react with almost the same speed is important for your portfolio’s profitability.
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