What Is Extended Trading?
Extended trading is the activity of trading securities before and after the official market hours. US stock exchanges like NASDAQ and the New York Stock Exchange operate from 9:30 am to 4 pm ET, but in some cases, investors are able to trade before the market opens and after the market closes.
Extended trading hours can be divided into pre-market and after-market trading. Pre-market trading begins at 4 am ET and ends at 9:30 am ET. It is followed by after-hours trading, which takes place between 4 pm and 8 pm ET.
How Does Extended Trading Work?
Extended trading is handled by a computerized order-matching system called an electronic market, which allows investors to place orders through their broker's electronic communications network (ECN). When an investor places bids through their brokerage, these requests are relayed through the electronic communication network (ECN), and if another investor is selling the same security at a similar price, the system matches both orders and executes the trade.
However, unlike traditional methods, extended trading comes with some differences.
For example, fewer investors tend to participate in after-hours trading, which results in lower trading volume and liquidity, leading to higher volatility. As a result, factors like these can affect the price investors receive for their shares. To minimize risk, investors use limit orders. However, if the ECN can’t match the limit price by market open, the order is likely to be canceled.
What Does Extended Trading Mean for Individual Investors?
Extended trading hours give investors the opportunity to capitalize on economic and business developments outside regular trading hours. Many companies tend to release their quarterly earnings reports after the market closes, which can cause their stocks to fluctuate. And even if you aren’t one of those people, after-hours volatility can provide valuable insights into which stocks may move the next day.
Some investors engage in premarket trading to get a jump on the regular session. Others use the pre-market activity as a gauge for the day's trends, sometimes finding that early-morning price and volume changes predict the day's overall direction.
In addition, when US markets are closed, global markets are still open. Foreign markets, such as Asian or European markets, can influence prices on US markets too.
Benefits of Extended Trading
- Convenience – If you're unable to trade during regular market hours, you can still make decisions in the aftermarket session.
- Reacting to news – Premarket trading allows investors to trade on news that occurs overnight and before the market opens, including corporate earnings, policies, and geopolitical developments.
Risks Associated with Extended Trading
- Price Uncertainty – prices of stocks traded in the after-market may differ significantly in comparison to regular hours.
- Limited Liquidity – the number of investors during the after-market is much smaller, therefore trading volumes tend to be lower which results in limited liquidity, greater volatility, and wide bid-ask spreads.
- Index values – index-based products are often not calculated or disseminated after the market close, which can disadvantage individual investors who do not have access to proprietary systems that calculate these values.
Extended Trading Hours with baraka
In addition to normal trading hours at 6:30pm – 1:00am GST, our investors can now trade 5.5 hours during the pre-market (1:00pm – 6:30pm GST) and 4 hours during the aftermarket session (1:00am – 5:00am GST). That’s a 16-hour trading window for all your strategic investing needs.
We’re extending our trading hours so you can trade the stocks you love whenever it’s convenient for you. Follow these steps to set it up:
- Choose your stock or ETF from the 6,000 securities we offer
- Click invest and change your order type to ‘limit order’
- Enter the amount you want to invest
- Choose ‘Extended Hours’ for the expiry option and confirm your order
Please note fees for Extended trading hours will apply to non-premium users on all trades made outside regular market hours trading:
- Percentage Fee = 0.049%
- Fixed Fee = $0.00
- Percentage Fee = 0.049%
- Fixed Fee = $1.99