Ever heard of after hour trading?
Some people think that once a stock exchange closes, trading itself stops, and once upon a time that was largely true. With the advent of electronic trading, however, after hour trading has become quite common. After hour trading can refer to any trading that takes place after markets close.
In fact, not only is there “after hours” trading, but there is also pre market trading. This means you can conduct a trade before markets open. There are also resources and websites that focus on after hour and premarket trading, such as marketwatch.com. These sites can be great sources of information.
Trading Floors Used To Be Part and Parcel With Stock Trading
Most trading floors keep normal business hours and operate between about 9:00 am and 5:00 pm. The actual hours can vary a bit from stock exchange to stock exchange. For example, the New York Stock Exchange trading floor is open from 9:30 am to 4:00 pm Monday through Friday. Hours can vary on holidays. The Singapore Exchange, on the other hand, opens at 9:00 am and closes at 5:00 pm (local time).
It’s not hard to figure out why stock markets are open during these time periods. These are normal business hours and most businesses are open during them. Most headlines and big developments also occur during this time frame because everyone is at work. This means companies will be releasing reports, meeting with the press, etc.
During these times you’ll see traders on the floor shouting out numbers and buying stocks. You might be wondering why trading floors exist at all, after all trades are now executed electronically (even those on the floor). The biggest reason is probably tradition and nostalgia, though some argue that trading on the floor can be executed slightly faster than through a computer screen.
In the old days it was impossible for the average trader to conduct an after hours trade because the stock floor was closed. This means that no one was there to execute an order. Big players, such as global banks, could still conduct after hours trading but your average investor couldn’t.
So if you’re a serious investor you should consider after hour and premarket trading! It can be a great way to get in on some early action and secure your position.
The Advantages Of Trading After Hours
The highest volume of trading in stock markets happen while the trading floors are open. This means prices will be closest to the “real” price during trading hours because markets will be operating most efficiently. Still, sometimes big headlines come in after hours and you might want to make a trade based on this news.
For example, a company might release its earnings report right after markets close. If the report is bad, you might try to sell off your stocks before markets open the next day and stocks plummet. Or if the news is good you might want to pick up stocks before prices rise. In this case some after hour trading or premarket trading can be a great way to buy or sell stocks.
So if you are a serious trading you should seriously consider trading before and after markets close. Many stock brokerage firms can now facilitate such trading even if they don’t have people down on the trading floor. More and more (in fact, most) trading is now down electronically so floors are no longer really necessary.
So make sure you check with your online stock broker to see if they can facilitate trading even when trading floors are closed! It can be a great way to stay ahead of markets and increase the performance of your stock portfolio.