Understanding Pre-Market and After-Hours Trading
TL;DR Definition
Pre-Market and After-Hours trading allow investors to buy and sell stocks outside regular market hours (9:30 a.m. to 4:00 p.m. ET). Pre-market runs before open, after-hours after close – enabling reactions to news like earnings but with lower liquidity and higher volatility.
What is Pre-Market? What is After-Hours?
Pre-market trading happens before the official open, letting traders react to overnight news. After-hours occurs right after close, capturing post-market announcements. Both use electronic networks (ECNs), such as NYSE Arca, Instinet, Bloomberg Tradebook.
How It Works
Orders route through ECNs matching buyers/sellers. Generally, these orders are limit orders (no market orders in most cases). Volume is typically lower than normal trading hours, so expect prices to swing more. Pre-market and after-hours trading can carry forward to the next regular trading session.
What Are the Pre-Market Hours?
Typically 4:00 a.m. to 9:30 a.m. ET – some brokers start earlier (e.g. 2:30 a.m.), others limit to 8:00 a.m. It’s crucial to know if your brokerage offers these services.
What Are the After-Market Hours?
Usually 4:00 p.m. to 8:00 p.m. ET. Again, this varies by broker and it’s best to check if your own broker offers this service.
Why Do Investors Engage in Pre-Market and After-Market Hours?
React instantly to earnings, news, and economic data.
Position ahead of regular open gaps.
Flexibility for global and time-zone traders.
Trade before other traders without pre-market trading.
What Are the Risks of Pre-Market and After-Hours Trading?
Low Liquidity – Wide spreads, hard fills, slippage.
High Volatility – Bigger swings from thin volume.
Institution Focus – Pros and institutions dominate during those times.
Price Gaps – Extended moves may reverse at open.
Limited Stocks/Orders – Not all order types available and mostly limits.
How to Trade Pre-Market and After-Hours?
Many brokers (Robinhood, Schwab, Fidelity, Interactive Brokers) offer extended market trading. Users would have to enable in settings and execute trades using limit orders. It’s generally not recommended for beginners due to risks and volatility.
Whilst extended trading hours give traders an extra window to get ahead of the market, Equity Perps allow users to trade stocks 24/7 even when markets are closed. On crypto platforms like BitMEX, trade stock perpetuals 24/7 with up to 20x leverage. Learn more here.
FAQs
How to trade before and after hours?
You’d first need to enable extended hours in your brokerage app and place limit orders during sessions. It’s important to know if your broker offers these services. Alternatively, you may trade Equity Perps which runs 24/7 even when markets are closed.
Is after-hours trading the same as pre-market?
No. Whilst both of them allow users to trade outside of regular market hours, they have different extended hours and intent when it comes to trading. For example, pre-market before market opens, allowing users to react to overnight news. Whilst after-hours operates post-close, allowing users to react to day’s end and earnings that occur afterwards.
What is the 10am rule in stocks?
This is an informal guideline for traders to wait until ~10 a.m. ET before placing major trades. This is because the first hour of the market is quite volatile and the market often sets daily direction by then.
What is the 3-5-7 rule in trading?
This is a fundamental risk management rule used to enforce discipline and effectively control risk. The rule has three components:
Risk no more than 3% capital per trade
No more than 5% of account value in open trades (e.g. if you have a $100,000 portfolio, your open trade positions must not exceed $5,000 in value)
Aim for winning trades that have a 7:1 reward ratio ($7 profit for every $1 dollar) or yield a profit of 7% ROI: This sets a target for potential profits to ensure that your winning trades significantly outweigh your losses.
By adhering to this rule, traders control losses, avoid overtrading, and maintain a consistent capital ratio.
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