After-hours stocks

We explain how after-hours stock trading works, what advantages it can offer, and what the risks are.

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Every stock market in the world has core hours during which most stock buying and selling takes place. But if you want to take advantage of opportunities that arise after a market has officially closed, you might want to find out more about after-hours trading. Here, we run through the basics of how it works and who it could be right for.

What is after-hours trading?

Every stock market globally has standard hours during which the majority of stock buying and selling takes place – 9am to 4pm local time, for example. But, in some cases, it’s also possible to trade once a stock market has officially closed for the day – perhaps from 4pm to 7pm. This is known as “after-hours” trading.

In some cases it is also possible to trade stocks before stock markets officially open, known as pre-market trading.

Why are stocks traded after-hours?

After hours (and pre-market) trading is typically aimed at those who want to take advantage of rapid movements in the stock market. For example, if a big company announcement that could affect a company’s stock value (the stepping down or hiring of a new CEO, say) takes place after stock market trading has closed for the day.

The opportunity is more likely to be used by traders looking for quick wins, such as day traders or those trading in derivatives, where you bet on on a company’s future performance, through spread betting or CFDs. It’s not really suitable (or necessary) for long-term investors who embrace a buy-and-hold approach, as any short term volatility in the stocks they hold will typically be ironed out in the long term.

How do I trade in the after-hours market?

Trading after-hours stocks works a bit differently to trading during standard market hours.

In both cases, you will need to buy and sell stocks via a broker or online share dealing platform. With trading during normal hours, buy and sell orders are placed directly on the relevant stock exchange. After-hours trades, on the other hand, are placed using a system that sits outside of this – a form of virtual marketplace for buying and selling stocks.

In most of Europe, these virtual marketplaces are known as multilateral trading facilities (MTFs). In the US, they’re called electronic communication networks (ECNs) or alternative trading systems (ATS).

In practical terms, you’ll still place your order via your broker in a similar way, selecting the stock you want to buy or sell and how much. But, unlike with standard-hours trading, with after-hours stocks you can only place limit orders. Limit orders set a price limit on how much you’re willing to buy or sell an asset for. The broker will try to match it, but your order will only go through if it can take place at the limit you’ve set (or better).

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Do all brokers offer after-hours stock trading?

Not necessarily. So, if you want the flexibility to be able to trade stocks out of hours, check before you open an account. Because after-hours trading requires access to special systems and involves third parties, it can involve more effort and expense for brokers to offer than regular trading. As such, so they’ll likely only offer it if they can guarantee a big enough customer base that’s interested.

In turn, this can mean that after-hours trading may cost investors more than standard-hours trading.

What stocks can I trade after hours?

As with the stocks you can trade in standard hours, the stocks available to trade after-hours will depend on the broker or investment platform you choose and the exchanges they offer access to. So if you have particular stocks that you want to trade in, check whether a potential provider offers it before you sign up.

What are the advantages of trading stocks after hours?

The main advantage of trading stocks after-hours is increased opportunity to take advantage of stock price swings that might happen after a market has officially closed for the day.

For example, in the US in particular, many firms release their quarterly earnings reports after trading has closed. After-hours trading lets investors buy stocks before the markets officially open the next day, if a company has posted stronger-than-expected results, say.

Or, conversely, if a company posted bad news about its performance – or something external happens that could have a negative impact – after-hours trading allows investors to get out early, or even to benefit from lower share prices.

After-hours trading may also simply be more convenient for some. This might be the case particularly if you’re trading in overseas markets where the standard trading hours are in the middle of the night.

What are the risks of trading stocks after hours?

Risks of after-hours trading include:

  • Price volatility. News about or that can affect a company’s performance can have a rapid effect on price. You might buy after-hours while a company is riding high, but there’s no guarantee that further upheaval won’t follow hot on its heels and reverse the trend overnight.
  • Lower liquidity. Far fewer investors trade after-hours than during standard trading hours. Given that you can only trade based on limit orders, there’s less certainty that your broker will find a match for your buy or sell request.
  • Wider spreads. When there is high volatility or low liquidity, the difference between the buy and sell price – aka “the spread” – can become wider.
  • Fewer choices. If you want to partake in after-hours trading you’ll have fewer brokers to choose from. You’ll also be restricted in terms of the virtual marketplace (ECN or MTF) your broker has access to.

What are the after hours sessions of leading stock markets?

Different stock markets have different periods of after-hours trading. The table below shows the periods for some of the world’s biggest.

Stock marketOfficial trading hoursTypical after-hours trading*
London Stock Exchange8am to 4.30pm4.40pm to 5.15pm
New York Stock Exchange9.30am to 4pm ET (2.30pm to 9pm UK time)4pm to 8pm ET (9pm to 1am UK time)
Hong Kong Stock Exchange9:30am to 4pm HKT (1:30am to 8am UK time)5:15pm to 3am HKT (9.15pm to 7am UK time)

* May vary by broker

Should you buy stocks after-hours?

Danny Butler

Finder insurance expert Danny Butler answers

Trading stocks after-hours comes with a number of risks. These mean it’s more suited to experienced investors looking to take advantage of very short-term market volatility. The chances of making a misjudgement, and potentially losing money, is high. Especially if you lack experience and/or the time and inclination to do thorough research at short notice.

No investing is risk-free. All investments come with the potential to go down as well as up. But, if you’re investing to fulfil long-term goals (retirement or sending a child to university, for example), then a buy-and-hold investment strategy is likely to deliver the best outcomes for the least amount of effort and stress. Over time, the short-term stock volatility that can take place once a market has closed will usually be smoothed out.

Pros and cons of trading stocks after hours

Pros

  • Convenience of longer trading hours
  • Allows experienced investors to take advantage of rapid price changes that can happen once stock markets have officially closed.

Cons

  • High price volatility could mean overnight reversals
  • Less choice of brokers who offer after-hours trading
  • Less liquidity due to fewer trades taking place after-hours.

Bottom line

Buying and selling stocks after hours isn’t right for everyone. Not every broker offers it. Meanwhile the increased price volatility and lower liquidity of after-hours trading makes it a higher-risk proposition. So it’s typically suitable only for experienced investors. But, if you know what you’re doing, after-hours trading could increase convenience and allow you to take advantage of short-term market movements.

Frequently asked questions

All investing should be regarded as longer term. The value of your investments can go up and down, and you may get back less than you invest. Past performance is no guarantee of future results. If you’re not sure which investments are right for you, please seek out a financial adviser. Capital at risk.

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Ceri Stanaway is a researcher, writer and editor with more than 15 years’ experience, including a long stint at independent publisher Which?. She’s helped people find the best products and services, and avoid the pitfalls, across topics ranging from broadband to insurance. Outside of work, you can often find her sampling the fares in local cafes. See full bio

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