there are a few threads in here about after hours trading with algos... the best one was from 2011.... that seems ancient for where algo trading is now? I had a simple question with a very complex answer probably. What pitfalls will i find while algo trading after hours? if it matters im at MC with IB data feed... my algo will be 5min or less TF thanks
is this going to be like everything else in trading... you wont "really" know how it works until you do it? what if my trades are small... $1-3 K in shares?
The liquidity problem still exists - not so much that you may move the price - not a lot of traders on here actually have that type of size - but how/where you get filled. Depending on what you plan on trading (e.g. stocks vs. options vs. forex ...) the bid/ask widens a lot and you don't get any good fills after hrs. Even for highly liquid stocks you'll have to hit the bid and buy the ask (or a couple pennies off it) rather than having a penny wide spread or getting filled close to a mid price. In that case you not only have to make a profit but make a serious profit that accounts for the fill gap as well. Check out how much it widens after hours in IB and try to fill it manually and you'll see what i mean. Having said that - if you trade SPY (I'm assuming you're talking about stocks since you mention shares) this is a non issue but even other liquid ETFs widen after hours - individual stocks typically more.
Agree with all of this, and the spreads get EVEN WORSE if you move to something that was thinly traded to start with. Many exchanges won't even have a bid/ask for a lot of instruments, because literally not a single person in existence wants to buy/sell that instrument at that time. Hard to get a fill then.
RM gave you the correct answer. I have to ask however... why in the world would you want to use an algorithm to trade after hours? I mean even asking about that... you're either trolling or you have a LOT of learning to do. And I mean no disrespect. Your question implies you know how to code. It also implies that you want to code some vehicle to trade stocks. But bro... asking that question.... and if its for real.... you are green as all get out. Work on writing code for the regular session first. Figure that out. Trust me, writing code to trade the after hours session, you'll need a human with years and years and years of experience. And even at that... you'll need your code to include some form of AI and machine learning. You best be Einstein on steroids. And if you are.... then you don't need the after hours session.... you'll make a trillion from 9:30 to 4:00.
That is 100% true. However, when responding to threads, proffering unprosaicness regarding the intended theme is of little use to the OP.
Why not learn where it's hardest, then liquid is easy. I don't mean that in as a way of torturing yourself, but rather that there are fewer trades, less motion, etc, so if you can get your algorithm to trade that then it's a great exercise.