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What Is After Hours Stock Trading?

After hours trading allow traders to take advantage from higher levels of volatility and trade without the market noise. Learn the key considerations of after hours trading below.
Hristina Nikolovska
Author: 
Hristina Nikolovska
Idil Woodall
Editor: 
Idil Woodall
7 mins
January 4th, 2024
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What Is After Hours Stock Trading?

The term after-hours stock trading refers to the exchange of shares on a market between the hours of 4:01 p.m. and 8:00 p.m. Eastern Time. After-hours trades include the buying and selling of shares at an agreed-upon price, just like the trades that occur during normal market hours.

After-hours trading is one of two forms of extended-hours trading, the other being pre-market trading. The development of electronic communication networks (ECN) meant investors no longer relied on manual intervention to trade stocks. ECNs allowed buyers and sellers to interact via electronic means both during regular trading hours as well as during extended hours.

Extended Hours Trading Explained

Trading outside the regular working hours of a stock exchange can happen right after the market closes and before it opens on the following day. Depending on when exactly the trading occurs, it can be referred to as:

  • After hours trading session, which occurs between 4.01 p.m and 8.00 p.m. (Eastern Time), or in the hours after the current market day closes

  • Premarket trading session, which occurs between 4:00 a.m. and 9.29 a.m. (Eastern Time), or in the hours before the new market day opens

Trading within any of these two timeframes is referred to as extended-hours trading.

Please note that not all ECNs make trading available during the entirety of the extended hours explained above. For example, with Wells Fargo, traders can’t trade during premarket hours, and during the after-hours, they can place orders between 4:01 p.m. and 6:30 p.m. (Eastern Time).

Trading Schedule

Here’s a schedule of normal, premarket, and after-hours trading times:

  • 4.00 a.m. – Premarket hours start

  • 9:29 a.m. – Premarket hours end

  • 9:30 a.m. – Regular market hours start

  • 4:00 p.m. – Regular market hours end

  • 4:01 p.m. – After hours trading starts

  • 8:00 p.m. – After hours session ends

Keep in mind that the time stamps in the schedule above are in Eastern Time.

Standard vs After-Hours Trading

Standard Trading Hours

After-Hours Trading

Timing

Typically, 9:30 a.m. to 4:00 p.m. (Eastern Time)

Usually starts at 4:01 p.m. and ends at 8:00 p.m. (Eastern Time), but may vary depending on the platform

Trading Location

Trading takes place on the primary stock exchange where the security is listed

Trading usually occurs on electronic communication networks (ECNs)

Tradeable Securities

A diverse range of securities, including stocks, options, bonds, mutual funds, and ETFs

Most listed securities and those traded on Nasdaq are available, but the availability of other securities may be limited

Liquidity

Higher liquidity as more market participants, including institutional investors, are actively trading

Lower liquidity compared to standard hours, as fewer traders are active during this time

Price Volatility

Prices are generally more stable due to higher trading volume and participation

Prices can experience larger swings due to lower liquidity and limited number of trades

Order Types

Most order types are available, including market orders, limit orders, stop orders, and others

Typically, only limit orders and market orders are accepted

Order Size

No specific limitations on order size during standard hours.

Some platforms may impose a maximum order size, such as a limit of 25,000 shares

Order Fill Probability

Higher chances of order fill during standard hours due to higher liquidity and trading activity

Lower chances of order fill during after-hours trading due to lower liquidity and reduced participation

Order Carryover

Orders can carry over to subsequent trading sessions if conditions are met

Orders normally expire in the same trading session they are placed and do not carry over to subsequent sessions

After-Hours Trading Pros & Cons

Pros
  • Allows traders to immediately react to breaking news
  • Gives traders with busy days a chance to enter the market
  • High volatility can be an opportunity for some traders
  • Potentially lower levels of market noise and distractions
Cons
  • Lower liquidity and reduced trading volume
  • Increased price volatility and wider bid-ask spreads
  • Potential for limited execution options and order types
  • Imposes traders to additional restrictions from their brokerage firms

After-Hours Trading Considerations

There are a number of reasons traders may want to engage in trading outside the regular hours of a market day:

  • They may be forced to do it because of their busy schedules;

  • Some traders may prefer trading in market conditions with fewer participants;

  • Other traders may want to adjust their positions based on news of recent events after the stock exchange's closing;

  • Many traders use the after-hours market to close their position before leaving on a vacation.

Whatever their motivation may be, to achieve the best results, traders have to keep the following considerations in mind when trading in the after-hours market.

Limited Number of Participants

The after-hours market typically has a more limited number of market participants compared to regular market hours.

This limited participation can impact the depth of the market, meaning there may be fewer available buyers and sellers.

As a result, bid-ask spreads, which represent the difference between the price at which buyers are willing to buy, and sellers are willing to sell, can be wider during after-hours trading.

Lower Trading Volume

In addition to wider bid-ask spreads, the limited number of market participants also means that the number of trades taking place during after-hours is often lower.

When significant news that may have an impact is released, the market may remain busy for the first couple of hours, but the trading volume typically considerably slows down around 6:00 p.m.

This lower volume translates into reduced liquidity in the after-hours market, which can make executing trades more challenging than usual.

Higher Price Volatility

The combination of lower volume and liquidity during the after-hours market can often lead to increased price volatility.

Due to the reduced number of participants, large buy or sell orders can have a more significant impact on prices, resulting in higher price swings compared to regular market hours.

For this reason, price discovery in the after-hours market may not accurately reflect the true market value, as trading activity is limited.

Brokerage Limitations

Not all brokerages offer access to after-hours trading, and those that do may have specific requirements or restrictions which traders need to be aware of.

As mentioned in the example of Wells Fargo above, different brokerage firms allow after-hours trading within various timeframes. It’s up to the trader to find a brokerage that will allow them to trade in the hours they want.

Also, brokerages may place certain limitations on the types of securities that can be traded during extended hours. For example, complex products, such as options or specific types of securities, may not be available for trading outside regular market hours.

Moreover, brokerage platforms may have specific order types and size limitations during after-hours trading.

Some brokerages don’t allow the placing of stop, stop-limit, fill-or-kill, and other order types, so traders must understand the specific rules and limitations imposed by their brokerage before engaging in after-hours trading.

FAQ

Who is allowed to trade after hours?
Is after-hours trading risky?
What is the safest time to trade?
  • The term regular trading hours refers to the standard stock exchange hours of operation, which are between 9:30 a.m. and 4:00 p.m. Eastern Standard Time. While investors can also trade in the after-hours market and pre-market, the largest numbers of shares are exchanged during normal hours.
    Moneyzine Editor
    Moneyzine Editor
    September 21st, 2023
  • Trading has never been easier, thanks to the rise of online platforms that enable you to buy and sell various assets at the click of a button. But with so many options available, it can be challenging to decide which platform is right for you.
    Idil Woodall
    Idil Woodall
    December 15th, 2023
  • The term pre-market stock trading refers to the exchange of shares on a market between the hours of 8:00 a.m. and 9:28 a.m. Eastern Standard Time. Pre-market trades include the buying and selling of shares at an agreed upon price, just like the trades that occur during regular market hours.
    Moneyzine Editor
    Moneyzine Editor
    November 6th, 2024

Contributors

Hristina Nikolovska
Hristina Nikolovska, a graduate of the University of Lodz, is a skilled finance writer for MoneyZine.com. With a knack for simplifying intricate financial topics, her articles provide readers with clear and actionable insights.
Idil Woodall
Idil is a writer with interests ranging from arts and politics to history and finance. She spent several years in publishing before becoming a full-time writer, and learning the inner workings of an industry she loved ignited her interest in economics. As an English graduate, she cultivated valuable research and storytelling abilities that she now applies to make complex matters accessible and understandable to many. When she’s not writing, she can be found climbing or watching a movie.
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