Extended-Hours Trading Explained
If you work during the weekday and can’t participate in the regular stock market session, no worries. You can still trade equities (and other investment vehicles) outside the regular session, which lasts from 9:30 am, EST, until 4:00 pm. You just need to find a broker that offers pre-market and after-hours trading, and know how to place the trades.
Extended-Hours Trading Varies from Broker to Broker
Some brokerage firms don’t offer any extended-hours trading. Among those who do, the hours can vary quite a bit. For example, Vanguard doesn’t offer trading before the opening bell; although it does have a post-market session, which ends at 6:30 pm.
Webull offers both an early session and a late-night session. Webull customers can trade between 4:00 am and 8:00 pm. This is the longest extended-hours period available today for stock trading.
For ETFs, some brokers offer a few funds in overnight trading, meaning that it’s possible to
trade them between 8:00 pm and 4:00 am as well.
TD Ameritrade is the best example.
Placing an Extended-Hours Trade
To submit an order before the market opens or after it closes, you typically must do something
different, such as enroll for extended-hours trading or check a box on the regular trade ticket.
This latter option is the standard protocol at Webull.
Webull’s order ticket has a radio button with the phrase Extended Hours next to it. If you want your order to be available for execution during these times, you must put a check mark in this button. On the mobile app, just tap on it. On the broker’s computer platform, there’s a drop-down menu with yes and no selections under the menu that says Ext-Hours.
Some brokerage firms have somewhat different software. For example, Firstrade’s order ticket has choices for after-hours only, pre-market only, or both sessions plus the day session.
Why Would You Want to Trade During Extended Hours?
Traders want to submit orders outside of regular market hours for all sorts of reasons. In the United States, public companies release earnings numbers before the market opens or after it closes, but never during market hours. If you are only able to trade during regular market hours, you could miss a huge trading opportunity if there is a surprise announcement. By the time you get in, it may be too late.
Another reason traders want access to pre-market and after-hours trading is to lock in profits when news stories break or when a government releases economic data. For example, if a war breaks out overnight in the Middle East, the stock prices of many companies will be affected before the opening bell.
Pitfalls of Extended Hours
Despite the advantages of trading during special sessions, there are many hazards. These include:
Lower liquidity. Fewer traders may mean you won’t be able to find a counterparty to your trade.
Wider bid/ask spreads. Because there are fewer trades being placed, the spread is larger, and this increases the cost of trading.
Less volume. Same issue here.
Overnight ETF Trading
A few brokerage firms in the United States now are offering overnight ETF trading in select funds.
Instead of closing shop at 8:00 pm, they continue offering trading in a few funds 24 hours a day, 5
days a week. Trading halts Friday evening and resumes Sunday evening.
At
TD Ameritrade,
we found 24 ETFs available for overnight trading. Some of these are well-known funds, like SPY and
GLD. To find the complete list, just open TD Ameritrade’s ETF screener and select Extended Hours Overnight
Trading in the top-left menu.
To place a trade using the broker’s software, you don’t need to do anything out of the ordinary.
The overnight ETFs trade just like they do during the day.
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$0 stock/ETF trades + transfer fee refund.
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Other Assets that Can Be Traded Outside of Market Hours
Besides ETFs, some other asset classes trade 24 hours a day, 5 days a week. The most popular is forex, the most traded asset in the world. There are times in the day that have lower liquidity, which means some of the risks with extended-hours trading exist with currencies. Ally Invest is one brokerage house that provides currency trading.
Futures also trade around the clock. At TD Ameritrade, it’s possible to trade futures contracts 24 hours a day, 6 days per week.
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