The stock market or technically speaking, the U.S. stock market exchanges—particularly the New York Stock Exchange (NYSE) and Nasdaq—is traditionally open between 9:30 a.m. and 4 p.m. ET (Eastern Time). However, with the adoption of new technology and increased demand for trading, these hours have been extended to include what is known as pre-market and after-hours trading.
- The rise of electronic trading networks and a desire to be competitive caused the major U.S. stock exchanges to allow trading before and after the regular market hours of 9:30 a.m. and 4 p.m. ET in the early 1990s.
- Pre-market trading typically occurs between 8:00 a.m. and 9:30 a.m., though it can begin as early as 4 a.m. ET.
- After-hours trading starts at 4 p.m. and can run as late as 8 p.m. ET.
- Known collectively as extended trading hours, the pre- and after-market sessions carry several risks: illiquidity, price volatility, and low volume/lack of participants.
- Pre-market and after-hours trading is done exclusively through electronic communication networks (ECNs).
Where to Find Off-Hours Market Data
The first place investors should look to find information about pre-market and after-market activity is their brokerage account's data service if they have one. Often brokerage information services provide the most detailed off-hour market trading data, and they usually come free with a brokerage account. Investors will often be able to not only trade within this time period but also see the current bid and ask prices for specific securities and the change in price compared to a previous period's close.
If you don't have a brokerage account or your broker doesn't provide this service, there are several free sites that give users access to pre- and after-hours market data. The Nasdaq website offers comprehensive quotes on shares listed on the Nasdaq, showing every trade – including the price, time and size of trades made in off-hours trading. For pre-market trading information, use the pre-market quotes service, and for after-hours information, use the after-hours quotes service. Although the NYSE's website does not offer such a detailed service, in terms of depth of information, the quoting service on its site shows you the last movements of the stocks during the off-hours market.
Other services like Yahoo Finance will show the last trade made in the pre- and after-hours markets. These services will usually cover all stocks, whether they trade on the NYSE, Nasdaq, or another exchange.
Pre-market and after-hours trading are also known collectively as extended trading.
The pre-market is the period of trading activity that occurs before the regular market opens. While its trading session typically occurs between 8:00 a.m. and 9:30 a.m. ET each trading day, several direct-access brokers allow access to pre-market trading to commence as early as 4:00 a.m.
However, very little activity occurs for most stocks so early in the morning, unless there is news. The liquidity is also extremely thin, with most stocks only showing stub quotes. So, while pre-market trading allows for an early jump on reactions to news—especially events that occur in Europe or the U.K.—the limited amount of volume can furnish a deceptive perception of a stock's strength or weakness. In fact, trading in the wee hours can be quite risky due to the possible slippage from exceptionally wide bid-ask spreads.
Most early birds wait to begin pre-market access at 8:00 a.m. Pre-market trading can only be executed with limit orders through electronic communication networks (ECNs), such as Archipelago (ARCA), Instinet (INCA), Island (ISLD), and Bloomberg Trade Book (BTRD).
The New York Stock Exchange introduced after-market trading in June 1991 by extending trading hours by an hour. The move was a response to increased competition from international exchanges in London and Tokyo and private exchanges, which offered more hours of trading.
Today, after-hours trading starts at 4 p.m. ET and can run as late as 8 p.m., although volume typically thins out much earlier in the session; the majority is done by 6:30 p.m. As in the pre-hours, trading in the after-hours is conducted through ECNs.
After-hours trading is something traders or investors can use if news breaks after the close of the stock exchange. The changes in share prices during the after-hours are a valuable barometer of the market reacts to the new information released. However, after-hours price changes are more volatile than regular-hours prices: As with the pre-market, illiquidity and lack of volume can be a problem. Institutional investors or certain major investors may choose simply not to participate in after-hours trading, regardless of the news or the event. As a result, it is quite possible for a stock to fall sharply in the after-hours only to rise once the regular trading session resumes the next day.