One concept traders would likely benefit understanding is how pre-market and post-market trading works for stocks.
To make sense of pre and post market stock trading, one must know the regular market hours. Regular trading hours are from 9:30am EST to 4:00pm EST. This is when the majority of exchanges are open and the most traders are placing orders. Regular market hours make up the bulk of the trading volume in any given day.
Pre-market trading occurs between the hours of 4:00am EST and 9:30am EST. Starting at 4:00am, exchanges and brokers begin to open up. Not all brokers will allow you to trade at this time. Some brokers might not allow you to trade until 5:00am or maybe even later.
Post-market trading or after-hours
Post-market trading occurs between the hours of 4:00pm EST and 8:00pm EST. Starting at 4:00pm, brokers and exchanges will allow the trading of stocks beyond the regular market hours. Similar to pre-market trading, not all brokers will allow you to trade the full duration of post-market.
Why is there a post-market and pre-market?
This allows for trading outside the regular market hours for investors and traders. While there is considerably less volume traded during the pre & post-market trading sessions, there can still be considerable news for a company.
Companies will release their earnings during pre or post-market hours. This helps them to avoid large, irrational reactions to earnings data. Companies will also use non regular trading hours to release other important company headlines for the same reason. For more in depth description of pre-market and post-market trading, click here.
If you plan on trading in the pre-market or the post-market, be sure to check with your broker to see what they allow when trading these sessions. It is important to remember that pre-market and post-market trading will typically be filled with less volume due to decreased supply and demand. With that comes low liquidity and large bid & ask spreads on the stock price. To learn more about stock trading, as well as options trading, click here.
If you still have questions about trading in the pre or post market, or any other stock & options trading question, simply fill out the form below and we will get back to you!