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 Nasdaq normally operate between 9:30 a.m. an 4:00 p.m. Eastern Time. Trades during the after-hours session can be completed through electronic exchanges anytime between 4:00 p.m. and 8:00 p.m. Eastern Time. These electronic communication networks (ECNs) match potential buyers and sellers without using a traditional stock exchange.

Key Takeaways

  • After-hours trading takes place after the markets have closed.
  • Post-market trading usually takes place between 4:00 p.m. and 8.00 p.m., while the pre-market trading session ends at 9:30 a.m.
  • Electronic communication networks 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.

Who Can Trade During the After-Hours Session?

After-hours trading was used primarily by institutional investors up until the 1990s when ECNs became more widely available. An ECN not only allows individual investors to interact electronically, it 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.

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 Pre-Market Trading

After-hours trading can be divided into two different parts of the day. The first is the post-market trading hours. Most exchanges usually operate post-market trading between 4:00 p.m. and 8:00 p.m. You can also take part in pre-market trading, which takes place the morning before the markets open—before 9:30 a.m. The start of the pre-market session depends on the exchange.

1:18

What's After-Hours Trading?

Risks and Dangers

The development of after-hours trading offers investors the possibility of great gains, but you should also be aware of some of its inherent risks and dangers:

  • 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: A lower volume in trading may result in a wide spread between bid and ask prices. Therefore, it may be hard for an individual to have his or her 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 who have access to more resources than the average individual investor.
  • Volatility: The after-hours market is thinly traded in comparison to regular-hours trading. Therefore, you are more likely to experience severe price fluctuations in after-hours trading than trading during regular hours.

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:

An investor who wants to sell her Goldman Sachs shares for $250.00 in the session after the regular markets have closed. Due to the highly illiquid nature of the after-hours market, the highest bid price from the sparse number of buyers is $240.00. She can either change her limit price to $240.00 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 8:00 p.m., all unexecuted orders are canceled.

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. 

Market Hours Schedule

New York Stock Exchange

  • Standard Trading: Monday through Friday, 9:30 a.m. through 4:00 p.m. ET
  • After-Hours Trading: Monday through Friday, 4:00 p.m. through 8:00 p.m. ET
  • Pre-Market Trading: Monday through Friday, 7:00 a.m. through 9:30 a.m. ET

NASDAQ Stock Exchange

  • Standard Trading: Monday through Friday, 9:30 a.m. through 4:00 p.m. ET
  • After-Hours Trading: Monday through Friday, 4:00 p.m. through 8:00 p.m. ET
  • Pre-Market Trading: Monday through Friday, 4:00 a.m. through 9:30 a.m. ET

U.S. Stock Exchange Holidays

U.S. markets are closed on the following days:

  • New Year’s Day
  • Martin Luther King Jr. Day
  • President’s Day
  • Good Friday
  • Memorial Day
  • Independence Day
  • Labor Day
  • Thanksgiving Day
  • Christmas Day

U.S. Stock Exchange Shortened Trading Days

The U.S. stock exchanges have shortened trading days and close early on the following days:

  • Day prior to Independence Day: 9:30 a.m. through 1:00 p.m. ET
  • Black Friday (the day after Thanksgiving): 9:30 a.m. through 1:00 p.m. ET
  • Christmas Eve: 9:30 a.m. through 1:00 p.m. ET