Let say you own a stock and after extended trading hours something bad happens. The stock will be down 20% pre - market. Who moved it and how when the exchange was closed ? Do institutions have the ability to sell at any time and then just report it to exchange? Could a retail trader somehow do the same or could a retail trader qualify somehow with their broker to be able to do the same? thank you
TABLE OF CONTENTS INVESTOPEDIA TRADING What Is After-Hours Trading, and Can You Trade at This Time? By BRIAN BEERS Updated October 17, 2021 Reviewed by SOMER ANDERSON Fact checked by ARIEL COURAGE The period of time in a day when trading activity takes place is known as the trading session. For most stock markets, the main trading session takes place during the daytime, when one trading session represents a single day of business. The beginning of the session is marked by the opening bell, which signals that the market is open. Similarly, the trading day ends with the closing bell. Most trading takes place during this time of day. But trading activity isn’t restricted to this time of day. It does, in fact, take place after the market closes—once normal business hours are done. This is known as the after-hours trading session. But there are some key differences between the normal trading day and the after-hours trading session. Read on to find out more about the after-hours session, how you can take part, and what you need to watch out for when you trade after the market closes. KEY TAKEAWAYS After-hours trading takes place after the markets have closed. Post-market trading usually takes place from 4 p.m. to 8 p.m. Eastern time (ET), while the premarket trading session ends at 9:30 a.m. ET. Electronic communication networks (ECNs) make after-hours trading possible. Risks associated with after-hours trading include less liquidity, wide spreads, more competition from institutional investors, and more volatility. After-hours trading allows investors to react immediately to breaking news and is much more convenient. What's After-Hours Trading? What Is After-Hours Trading? After-hours trading is the period of time after the market closes when an investor can buy and sell securities outside regular trading hours. Both the New York Stock Exchange (NYSE) and the NasdaqStock Market normally operate from 9:30 a.m. to 4 p.m. Eastern time (ET). Trades during the after-hours session can be completed anytime from 4 p.m. to 8 p.m. ET.12 In these extended trading sessions, electronic communication networks (ECNs) match potential buyers and sellers without using a traditional stock exchange. The trading volume during the after-hours trading session tends to be fairly thin. That’s because there are usually very few active traders during this time period. This can change, though, with volume spiking if there’s big economic news or an unexpected new development at a company. Traders can also expect wider spreads—the difference between the bid and ask prices—after the market closes.3 Who Can Trade During the After-Hours Session? After-hours trading was used primarily by institutional investors up until mid-1999, when the services of ECNs became more widely available to retail investors.4 An ECN not only allows individual investors to interact electronically but also lets large institutional investors interact anonymously, thereby hiding their actions. As extended trading has become increasingly popular over the past decade, investors have embraced it. In fact, a number of brokers now offer after-hours trading, including Charles Schwab, Fidelity, and TD Ameritrade.567 Make sure you read all the disclosure documents prepared by your brokerage firm before you start trading in the after-hours market. Post-Market and Premarket Trading After-hours trading can be divided into two different parts of the day. The first is the post-market trading session. Most exchanges usually operate post-market trading from 4 p.m. to 8 p.m. ET. You can also take part in premarket trading, which takes place the morning before the markets open—before 9:30 a.m. ET. The start of the premarket session depends on the exchange.12 Risks and Dangers The development of after-hours trading offers investors the possibility of substantial gains, but you should also be aware of some of the inherent risks and dangers that come with investing during this time. These include: Less liquidity: There are far more buyers and sellers during regular hours. During after-hours trading, there may be less trading volume for your stock, and it may be harder to convert shares to cash. Wide spreads: As noted above, a lower trading volume may result in a wide spread between the bid and ask prices. Therefore, it may be hard for an individual to have their order executed at a favorable price. Tough competition for individual investors: While individual investors now have the opportunity to trade in the after-hours market, the reality is that they must compete against large institutional investors that have access to more resources than the average individual investor. Volatility: The after-hours market is thinly traded in comparison to trading during regular hours. You are more likely to experience severe price fluctuations in after-hours trading than during regular-hours trading.3 While technology can affect the regular trading day, there may be more lags and delays during after-hours trading, meaning your trades may not even go through. Here’s an example of some of the risks associated with after-hours trading: Assume an investor wants to sell her shares of a company—call it XYZ Co.—for $250 in the session after the regular markets have closed. Due to the illiquid nature of the after-hours market, the highest bid price from the sparse number of buyers is $240. She can either change her limit price to $240 to sell right away, or she can keep her original price and run the risk of a partial order or a not-filled order. At the end of the trading session at 8 p.m., all unexecuted orders are canceled. [paste:font size="5"]Benefits After-hours trading comes with a number of risks, but there are some possible benefits, too: Trading on fresh information: Being able to trade after the normal markets close allows you to react quickly to breaking news stories or fresh information before the next day’s market open. Pricing opportunities: Although volatility is a risk associated with trading after hours, you may find some appealing prices during this time. Convenience: Investors may prefer trading at off-peak times, and after-hours trading provides this added flexibility. Practice trading with virtual money SELECT A STOCK TSLA AAPL NKE AMZN WMT SELECT INVESTMENT AMOUNT $ SELECT A PURCHASE DATE Should I trade after hours or wait for the regular trading session? It really depends on a number of factors, including your risk tolerance, trading strategy, and whether you are entering or exiting a position. The typical investor might prefer to wait for the regular trading session, but an experienced trader might dabble in the after-hours market to either close a losing position or get a jump on initiating a new position. Make sure you know about the risks involved in trading after hours, and evaluate whether the benefits outweigh these risks in your specific situation. Is it too risky to trade in the after-hours market? Again, it depends on the investor’s personal preferences and risk tolerance. Seasoned traders find that risks such as lower volumes and wider bid-ask spreads are more than offset by the opportunity to act on new information before the next day’s regular trading session, as well as the potential to trade mispriced securities. When can you trade after hours? Generally from 4 p.m. to 8 p.m. for most exchanges. However, the vast majority of after-hours trading takes place from 4 p.m. to 6 p.m., so be extra careful if you intend to trade in the final hour or two of the after-hours trading session. Does Robinhood allow after-hours trading? Yes, Robinhood allows after-hours trading on its platform. Can I use a market order to trade a stock after hours? No, a market order cannot be used in after-hours trading. Most brokerage firms only accept limit orders in after-hours trading to protect investors from unexpectedly bad prices that may result from the lower trading volumes and wider spreads during this session. Market Hours Schedule NYSE (Tape A) [/paste:font] Preopening: Monday through Friday, 6:30 a.m. ET Standard trading: Monday through Friday, 9:30 a.m. to 4 p.m. ET NYSE (Tapes B and C) Preopening: Monday through Friday, 6:30 a.m. ET Early trading: Monday through Friday, 7 a.m. to 9:30 a.m. ET Standard trading: Monday through Friday, 9:30 a.m. to 4 p.m. ET NYSE American Equities, NYSE Chicago, NYSE National Preopening: Monday through Friday, 6:30 a.m. ET Early trading: Monday through Friday, 7 a.m. to 9:30 a.m. ET Standard trading: Monday through Friday, 9:30 a.m. to 4 p.m. ET Late trading: Monday through Friday, 4 p.m. to 8 p.m. ET NYSE Arca Equities Preopening: Monday through Friday, 3:30 a.m. ET Early trading: Monday through Friday, 4 a.m. to 9:30 a.m. ET Standard trading: Monday through Friday, 9:30 a.m. to 4 p.m. ET Late trading: Monday through Friday, 4 p.m. to 8 p.m. ET1 Nasdaq Stock Exchange Early trading: Monday through Friday, 4 a.m. to 9:30 a.m. ET Standard trading: Monday through Friday, 9:30 a.m. to 4 p.m. ET Late trading: Monday through Friday, 4 p.m. to 8 p.m. ET2 U.S. Stock Exchange Holidays U.S. markets are closed on the following days: New Year’s Day Martin Luther King Jr. Day Presidents Day Good Friday Memorial Day Independence Day Labor Day Thanksgiving Day Christmas Day81 U.S. Stock Exchange Shortened Trading Days The U.S. stock exchanges have shortened trading days and close early on the following days: Black Friday (the day after Thanksgiving): 9:30 a.m. to 1 p.m. ET Christmas Eve: 9:30 a.m. to 1 p.m. ET18 ARTICLE SOURCES PART OF Guide to Extended Trading Extended Trading: Definition, How It Works, Risks, and Hours 1 of 13 Trading Session 2 of 13 Pre-Market Trading: How It Works, Benefits, and Risks 3 of 13 After-Hours Trading: How It Works, Advantages, Risks, Example 4 of 13 Trading in the Pre- and Post-Market Sessions 5 of 13 Pre-Market and After-Hours Trading 6 of 13 Pre-Market and After-Hours Trading Activities 7 of 13 How the Nasdaq Pre-Market Works 8 of 13 What Is After-Hours Trading, and Can You Trade at This Time? 9 of 13 How After-Hours Trading Affects Stock Prices 10 of 13 After-Hours Trading: Bid and Ask Quote Disparity 11 of 13 Overnight Trading 12 of 13 What Is a GTEM Order? 13 of 13 Related Articles TRADING ORDERS How After-Hours Trading Affects Stock Prices STOCK TRADING STRATEGY & EDUCATION Pre-Market and After-Hours Trading STOCK TRADING STRATEGY & EDUCATION After-Hours Trading: Bid and Ask Quote Disparity TRADING BASIC EDUCATION Trading in the Pre- and Post-Market Sessions STOCKS How the Nasdaq Pre-Market Works US MARKETS What Days Are the U.S. Stock Exchanges Closed? Related Terms After-Hours Trading: How It Works, Advantages, Risks, Example After-hours trading refers to the buying and selling of stocks after the close of the U.S. stock exchanges at 4 p.m. through 8 p.m. U.S. Eastern Time. more Session Price Definition The session price is the price of a stock over the trading session and may sometimes refer to a stock's closing price. more Trading Session A trading session is measured from the opening bell to the closing bell during a single day of business within a given financial market. more Overnight Trading Overnight trading refers to trades that are placed after an exchange’s close and before its open. more New York Stock Exchange (NYSE): Definition, How It Works, History The New York Stock Exchange, located in New York City, is the world's largest equities-based exchange in terms of total market capitalization. more Extended Trading: Definition, How It Works, Risks, and Hours Extended trading is conducted by electronic exchanges either before or after regular trading hours. Volume is typically lower, presenting risks and opportunities. more Facebook Instagram LinkedIn Newsletter Twitter About Us Terms of Use Dictionary Editorial Policy Advertise News Privacy Policy Contact Us Careers EU Privacy Investopedia is part of the Dotdash Meredith publishing family. Ad
Although it's a bit vague it sounds like you are asking about overnight gaps. Market participants don't bid/ask at yesterday's price when markets open today (generalizes whether we are talking RTH or the gap between afterhours and premarket). The open price will factor in anything that happened that affected the company's valuation while the markets were closed. Although, as market participants aren't perfect, the initial price might be an over/underreaction. Certain derivatives on a stock might be traded at other hours (e.g. some CFD bucketshop to pick a retail example), but in that case it would be more accurate to say a change in the valuation of the company caused a change in the price of those derivatives rather than the reverse. If you meant price movement in afterhours or premarket, apologies (and the reply above is more relevant).
Have this conversation with your broker as to what is a clearable offset. Your price and costs can be awful so please understand what your broker can accomplish and if they'll even have systems available to access what liquidity is around. If you really think it's going to open 20% lower you might be better off with a listed hedge you can unwind when things reopen. Going to an available venue may cost a retail trader a ton more. Expect it to be at the venue's legal limits worst b/a.