Definition
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.
Explanation
Investors have the option of completing trades during regular hours, after-hours and during pre-market; the latter two are also referred to as extended hours. Prior to the advent of electronic communications networks (ECN), investors were limited to trading during regular hours, which are between 9:30 a.m. and 4:00 p.m. Eastern Standard Time (EST).
While companies oftentimes release new information after or before regular hours, trading during the market's normal hours of operation provides investors with several advantages, including:
Liquidity: since there are more market participants during normal hours, it is easier for investors to sell and buy shares at a fair price.
Spreads: once again, since the number of participants is larger during normal hours, the bid and ask price spreads will be smaller than during extended hours.
Volatility: finally, the competition and volume of transactions that occur during normal hours means the price swings of individual stocks will be smaller too.
Related Terms
after-hours stock trading, pre-market trading
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