A:

For over a decade now, major U.S. stock markets have offered extended trading hours outside the standard trading hours of 9:30 a.m. to 4:00 p.m. Central Standard Time. Despite many years to iron out kinks and encourage wider trading periods, trading outside of regular trading hours carries additional risks. Below is some further insight on how after-hours traders study the markets.

Track the News Closely

Companies generally look to release earnings and other major news events outside of regular trading hours. The intent is to let market participants read the news updates and spend some time thinking about what this means to a company and its operations. Some companies, including Warren Buffett’s Berkshire Hathaway (BRK.B) and Dillard’s (DDS), have even gone as far as releasing news on the weekend to let the news be disseminated through the market. For traders able to make moves after-hours, it is important to read news as quickly as possible, or have a prior estimate of earnings news flow to be able to act when the actual results are released.

Trading Data

Trading data, including basic stock quotes, volume trends, and bid/ask spreads are more difficult to come by outside of regular trading hours. After-hours traders must work harder to track this information down and verify its accuracy. Major news sources, including Marketwatch and Yahoo! Finance, offer after-hours trading updates. One of the better sources is the exchanges themselves. Nasdaq and the New York Stock Exchange (NYSE) have websites with information that is timely and accurate.

Make Volatility Your Friend

Savvy traders are on the lookout for volatility or knee-jerk reactions where a stock temporarily becomes disconnected from its fundamentals. Some traders specialize in trading at night, and the ability to track global markets that are open when U.S. exchanges are closed can lead to information advantages over other investors.

The Bottom Line

After-hours trading is risky, but following vital data can make trading outside of regular trading a profitable endeavor for investors.

At the time of writing Ryan C. Fuhrmann, did not own shares in any of the companies mentioned in this article.

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