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Premarket to After-Hours Trading: Trading Hours Explained | Comment Below - YouTube
Channel: TD Ameritrade
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So, you鈥檙e interested in buying a stock
and you鈥檙e ready to place the order,
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but the market has already closed
for the day. What do you do?
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I鈥檓 Education Coach Michael
Kealy, and this is Comment Below.
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We鈥檝e gotten a lot of questions
about how trading hours work,
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so we figured we鈥檇 dive into the world of trading
outside of normal trading hours. Can it be done?
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Yes, but there is some nuance. Let鈥檚
break down the actual hours you can trade,
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the securities you can trade, the order types
you can use, and how it all works together.
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So, regular market hours are considered 9:30 a.m.
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to 4 p.m. Eastern Time.
That鈥檚 because the New York Stock
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Exchange and most other exchanges for
that matter are based in New York City.
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That means early mornings for West Coast
traders and late nights for European traders.
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But you can trade outside of these normal hours
in what鈥檚 known as Extended-Hours Trading.
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Typically, premarket runs from 4 a.m.
Eastern Time to the opening bell,
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and after-hours trading lasts from
the closing bell to 8 p.m. Eastern,
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though you鈥檒l want to check with your brokerage
because each firm has different times.
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Timing also depends on the
security you鈥檙e looking to trade:
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Some don鈥檛 trade outside of regular hours at all,
and
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some trade 24 hours a day, five days a week.
Billions of shares are traded every day during
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regular hours on the U.S. exchanges alone,
so why might you trade during extended hours?
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Well, for starters, it鈥檚 pretty
convenient. If you have a day job,
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it can be pretty tough to stay on top of
every market move while you鈥檙e at work.
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Extended-Hours Trading also lets you react in real
time to market news like company earnings reports,
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leadership changes, or new product launches.
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These announcements are typically made
outside of market hours on purpose to
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give investors time to absorb the information
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and hopefully avoid reactive trading and excessive
volatility.
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Trading on the news without having
to wait for the market to reopen
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could allow you to capture some additional gains.
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But there are some disadvantages
to Extended-Hours Trading too.
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Orders may be partially executed or not at all.
Liquidity tends to be much lower, bid-ask spreads
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much wider, and volatility much higher. Take a
look at Doordash. Its stock price jumped from $114
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to $128 after hours between May 13 and May 14,
2021. Or look at Gamestop a few months earlier,
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on January 27 and 28. Between the bells, the
stock dipped to around $220, rallied to $513
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and dipped all the way back down to around $250.
That鈥檚 how Extended-Hours Trading works on a
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conceptual level, but how do you actually place
trades for the pre- and postmarket sessions?
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Let鈥檚 jump in to thinkorswim to show you
exactly how to place an extended-hours trade.
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Keep in mind, mutual funds, bonds and most
options do not trade in extended hours.
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I鈥檒l open up the Trade tab and load up Apple. Ticker symbol AAPL.
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Let鈥檚 go ahead and select the ask price
to buy. It鈥檒l load up an order ticket.
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Many brokerages only allow limit orders in the
extended hours. According to the SEC, this is a
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way to protect investors from unexpectedly bad
prices. So, I鈥檒l enter a limit price of $132.
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Now, this next part is really important
if I want my trade entered for one of
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the extended-hours sessions. I鈥檒l select
the Time in Force drop-down. You can see
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there are several choices here beyond
the usual day and good till canceled.
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Let鈥檚 break down the choices. If you choose day,
your trade will be valid only for the regular
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trading hours of that day. If you try to enter a
regular day order outside of normal trading hours,
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it鈥檒l take effect at the next day鈥檚 opening
bell. GTC stands for good till canceled, which
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typically allows the order to stay active for
six months but only during regular trading hours.
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You鈥檒l also notice EXT in the drop-down. This
simply extends the order into the extended-hours
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sessions, so if you place an EXT order at any
point after the start of premarket trading,
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it will be valid for any of
the day鈥檚 trading sessions.
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If an EXT order is placed after 8 p.m., it will
be valid for all trading hours the following day.
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The same is true for a GTC_EXT
order; you can place it at any time,
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and the order could execute at the limit
price or better in any trading session
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premarket, regular, or
after-hours
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Some users may also see AM and PM choices. If
you select AM or PM, your trade will only be
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valid during the premarket or after-hours sessions
respectively. For this trade, I鈥檒l choose GTC_EXT,
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meaning I鈥檓 sending an order that
will be valid in any trading session.
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Once my order is setup, I鈥檒l select Confirm and
Send, and then select Send to place the trade.
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There are also some ETFs that trade
24/5 on thinkorswim. To find these,
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pull up the 24-Hour Trading public watchlist.
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Keep in mind that you can鈥檛 place extended-hours
trades in paperMoney庐, so there鈥檚 no way to
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practice this without real money on the
line. So, while there are some benefits
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to trading after-hours or in the wee hours in
the morning, it鈥檚 not for the faint of heart.
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