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.<\/p>
Every stock market globally has standard hours during which the majority of stock buying and selling takes place \u2013 9am to 4pm local time, for example. But, in some cases, it\u2019s also possible to trade once a stock market has officially closed for the day \u2013 perhaps from 4pm to 7pm. This is known as \u201cafter-hours\u201d trading.<\/p>
In some cases it is also possible to trade stocks before stock markets officially open, known as pre-market trading.<\/p>
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\u2019s stock value (the stepping down or hiring of a new CEO, say) takes place after stock market trading has closed for the day.<\/p>
The opportunity is more likely to be used by traders looking for quick wins, such as day traders<\/a> or those trading in derivatives, where you bet on on a company\u2019s future performance, through spread betting or CFDs. It\u2019s 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.<\/p> Trading after-hours stocks works a bit differently to trading during standard market hours.<\/p> In both cases, you will need to buy and sell stocks via a broker or online share dealing platform<\/a>. 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 \u2013 a form of virtual marketplace for buying and selling stocks.<\/p> In most of Europe, these virtual marketplaces are known as multilateral trading facilities (MTFs). In the US, they\u2019re called electronic communication networks (ECNs) or alternative trading systems (ATS).<\/p> In practical terms, you\u2019ll 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<\/a>. Limit orders set a price limit on how much you\u2019re 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\u2019ve set (or better).<\/p>\n\n\n\nHow do I trade in the after-hours market?<\/h3>