Many people think they can trade in the stock market only from 9 A.M to 4 P.M US Eastern Time. Well, they are wrong. You must know that you can trade before and after the official hours of the stock market. For example, if you are trading before the opening of the stock market, it’s called pre-market hours. The pre-market hours start from 6 A.M and end at 9 A.M.
Similarly, the after-hours trading session starts after the closing of the stock market. It begins at 4 P.M and ends at 9 P.M. Moreover, in this article, we will help you understand better the difference between pre-market and after-hours trading.
For pre-market and after-hours stock trading, you cannot use official buildings of the stock market. You must have access to electronic communication networks, such as the Nasdaq Market.
Moreover, the electronic media has changed almost every field of life. It is also changing the stock trading. Nowadays, people can access the stocks via ECN. Further, they can trade before and after official hours of the market. Simply said, the ECN eliminates the restriction of trading from 9 A.M to 4 P.M.
Why Do People Trade During After-Hours or Pre-Market Hours?
Sometimes the news or events of an organization leave an impact on its stock shares. Such results either cause a rise in share values or contribute to the stock fall.
In this situation, traders prefer to act as soon as possible. They can either sell or buy the desired shares, of course. Thus, they either trade during pre-market or after-market hours.
Moreover, by doing so, stock exchanges remain active even after the official hours of the stock market. However, during the pre-market and after-hours trading session, the volume of trading thins out. Very few investors or traders buy or sell stocks during pre-market hours of the stock exchanges.
Further, the analysis of the stock market reveals that many traders do not prefer to trade during off-hours. Also, different real-life examples show that the stock exchanges face a fall during pre-market or after-hours. This fall is evidence that traders do not trust electronic communication network for their massive investments.
Furthermore, keen investors prefer to analyze the stocks’ condition before making any decision. Thus, we recommend you to analyze the stock situation before you make pre-market or after-hours trading.
Trading During Pre-Market and After-Hours
Any information related to the organization leaves a profound impact on its shares’ value. Thus, in case of any incident with the organization, it may face a fall in its share prices.
Similarly, with the starting of new projects, the share prices may spike. This rise of fall of share values leaves an adverse impact on traders’ intention to invest in the stock market. Thus, they prefer to either buy or purchase the stock as soon as possible.
Moreover, in this condition, some traders do not wait for the official opening of the stock market. They may be afraid of more fall in the stock prices. Thus, they purchase or sell their stock via ECN during pre-market or after-hours of the stock market. It helps them to invest in the right place. Also, it brings long term benefits for the investors.
When Is the Right Time to Trade?
Pre-market trading enables you to trade before the opening of the stock market. However, if you want to sell or buy the stock, you don’t need to wait for the official opening of the stock market. Similarly, if you got late to deal with your stock investment. You don’t need to worry. Just use ECN and remain active throughout the after-hour trading session.
Moreover, traders make pre-market or after-hours trading in some particular cases. For example, if the organization faced a considerable loss, traders must not wait for the stock fall. In such a situation, they may immediately sell their stock even after office hours of the stock market.
However, it is recommended not to trust the stock prices and values during pre-market and after-hours sessions. Moreover, sometimes, hasty choices may lead to a significant loss.
The purpose of setting pre-market and after-hours trading is to keep the market active for more hours. After the official hours of stock exchanges, the volume of the trading thins out.
However, with the facility of ECN, stock dealers or investors remain active in the selling and purchasing of assets. Previously, the stock market only allowed investors to trade during the official hours of the stock market. And this somehow reduced the people involved in stock shares.
Moreover, many people remain engaged in their official duties from 9 A.M to 4 P.M. Now, investors have the opportunity to sell and purchase stocks at any time. In this way, the stock market remains active. However, the rise of stock trading occurs only during the official trading hours.
As we were discussing, traders’ engagement remains minor during pre-market and after-hours. It also leaves a profound impression on the stock prices. The bid and the ask prices are profoundly affected due to fewer shares trading. So, be careful when you trade during the pre-market or after-hours session.