Trading The Most Volatile Stocks After Hours

By Cory Mitchell | August 14, 2014 AAA

After-hours trading is common in the most volatile stocks, especially on days when a company issues a high-impact news release, such as earnings. When this occurs traders continue to actively trade the stock after the 4:00 p.m. EST closing bell. Trading activity after-hours is an an early indication as to where the price will open the following morning, therefore, by trading after-hours, traders can attain advantageous (or potentially worse) prices compared to what will be available the following day. To do this, traders need to know what after-hours trading is, and then find the most volatile stocks with volume and lots of interest after the official market close.

After-Hours Trading

When the NYSE and NASDAQ exchanges close at 4:00 PM EST trading ceases in most stocks, and the bid-ask spread widens as traders cancel their orders for the night. Those that wish to place bids or offers, buy or sell, can. Between 4:00 PM EST and 8:00 PM EST, after-hours trading takes place. 

For most stocks, very few shares change hands after-hours, so if trading after-hours it is important to find a stock that has volume - to enter and exit positions with -as well as volatility to profit from.

Finding the Most Volatile Stocks with After-Hours Volume

Company earnings or news releases after the bell draw big attention and create both volume and volatility as traders react to the news. 

Yahoo! Finance provides a free earnings calendar. Many of these earnings releases occur "After Market Close," providing opportunity to act on a news release as it occurs, instead of waiting for the next trading day. The calendar therefore provides a list of stocks to watch after hours for opportunity.

Note the stocks during the day, and narrow the list to a smaller more manageable selection of stocks to trade. Do this by filtering out those with average daily volume less than 1 million shares. If the shares don't have significant volume during the regular trading session - 9:30 AM to 4:00 PM EST -  then it is unlikely to have significant volume after the closing bell, even with a major news release.

The Bottom Line

After-hours trading occurs between 4:00 PM and 8:00 PM EST. Most stocks will have very little activity during this time, but some have significant volume and volatility, especially if earnings or news is due out after-hours. Trading after-hours gives traders an opportunity to act on news-related price moves, instead of waiting till the following trading day. After-hours trading should only be done in the most volatile stocks if there is adequate after-hours volume to enter and exit positions with ease.

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