Why does after hours trading exist

I Accept Show Purposes. Your Money. Personal Finance. Your Practice. Popular Courses. Part Of. Key Takeaways: After-hours trading occurs after regular market hours.

Electronic communication networks ECNs rather than traditional markets match potential buyers and sellers. After-hours trading is more volatile and riskier than trading during the exchange's regular hours, because of fewer participants, as a result of which trading volumes and liquidity may be lower than during regular hours.

Due to after-hours volatility, the opening price for a stock on the following day may be quite different from the price it traded at in the after-hours market.

How can I trade in the after-hours market? Why would an investor or trader want to trade in the after-hours market? Why are stock prices more volatile in after-hours trading? If my after-hours order is not filled, will it carry over to the next day's trading? Article Sources. Investopedia requires writers to use primary sources to support their work.

These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy. Compare Accounts. The offers that appear in this table are from partnerships from which Investopedia receives compensation.

This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace. Related Articles. Partner Links. What Is a Trading Session? A trading session is measured from the opening bell to the closing bell during a single day of business within a given financial market. Curb Trading Definition Curb trading occurs outside of general market operations, commonly through computers or telephones after exchanges close.

Pre-Market Definition Pre-market is trading activity that occurs before the regular market session; it typically occurs between a. EST each trading day. Close The close is the end of a trading session in financial markets, the process of exiting a trade, or the final procedure in a financial transaction.

The more you spread the love the more we get people educated about trading. Your email address will not be published. Required fields are marked. Share 0. Tweet 0. After Hours Trading Explained. Related Posts. Best Trading Computer Should He Invest Or Trade? TradingView Tutorial: Dark Theme. The after-hours trading session can run as late as 8 p. Trading in the after-hours is conducted through electronic communication networks ECNs.

After-hours trading is something traders or investors can use if news breaks after the close of the stock exchange. In some cases, the news, such as an earnings release, may prompt an investor to either buy or sell a stock. The volume for a stock may spike on the initial release of the news but most of the time thins out as the session progresses. The amount of volume generally slows significantly by 6 p. There is a substantial risk when trading in illiquid stocks after-hours. Not only does volume sometimes come at a premium in the after-hours trading sessions but so does price.

It is not unusual for the spreads to be wide in the after-hours. The spread is the difference between the bid and the ask prices. Due to fewer shares trading, the spread may be significantly wider than during the normal trading session. In some cases, certain investors or institutions may choose simply not to participate in after-hours trading , regardless of the news or the event. This means that it is quite possible for a stock to fall sharply in the after-hours only to rise once the regular trading session resumes the next day at a.

Because volume is thin and spreads are wide in after-hours trading it is much easier to push prices higher or lower, requiring fewer shares to make a substantial impact.

Since after-hours trading can have a significant impact on a stock's price , it's not a bad idea to put a limit order on any shares you intend to buy or sell outside of regular trading periods. Nvidia Corp. NVDA earnings results in February are an excellent example of how after-hours trading works and the dangers that come with it. Nvidia reported quarterly results on February As the chart shows, volume was steady in the first 10 minutes and then dropped quickly after p.

However, volume slowed materially with just , shares trading between and From a. Nearly all of the after-hours gains had evaporated.

Day Trading.