Trading Session

What is a 'Trading Session'

A trading session is a period of time consisting of one day of business in a financial market, from the opening bell to the closing bell. Within the time frame of the trading session, all orders for the day must be placed, and buyers and sellers both participate in setting current market prices.

BREAKING DOWN 'Trading Session'

The regular trading session for U.S. equities occurs between 9:30 a.m. to 4:30 p.m. Eastern Time on weekdays.

The futures market has different trading hours that vary based on the exchange and commodity traded. For example, the CME Group’s corn futures trade between 7:00 p.m. and 7:45 a.m. and then between 8:30 a.m. and 1:20 p.m. on weekdays. Traders should take a look at trading session hours for any securities and derivatives that they’re interested in trading beforehand to prevent any unexpected problems from arising.

In addition to regular trading sessions, some markets may have pre-market or after-hours trading sessions outside of these normal hours. Other markets have 24-hour trading sessions.

Pre-Market & After-Hours Trading Sessions

Pre-market trading for U.S. equities occurs between 4:00 a.m. and 9:30 a.m. Eastern Time on weekdays and after-hours trading occurs between 4:00 p.m. and 8:00 p.m. Eastern Time on weekdays, although these times may vary slightly by exchange.

Pre-market and after-hours trading is a popular way to get a leg up on the competition by reacting quickly to news announcements or other factors that come outside of regular hours. But, there are some important caveats that investors should carefully consider that arise from less liquidity and more opaque pricing than regular hours trading.

The Securities and Exchange Commission notes eight risk factors:

  1. Inability to See or Act on Quotes – Some brokers only enable investors to view quotes from its own trading system rather than other ECNs.
  2. Lack of Liquidity – There are fewer traders involved with after-hours trading, which means that there’s typically a lot less liquidity than regular trading sessions.
  3. Larger Quote Spreads – Less trading activity often translates to wider spreads between bid and ask prices that could make order execution difficult.
  4. Price Volatility – There may be greater fluctuations than during regular hours, particularly if there’s a new story of fundamental event that occurs.
  5. Uncertain Prices – The price of stocks traded after-hours may differ from those traded during regular trading sessions.
  6. Bias Toward Limit Orders – Many ECNs only accept limit orders rather than market orders during after-hours sessions.
  7. Competition with Professional Traders – Many after-hours traders are professionals with large institutions who have access to more information.
  8. Computer Delays – There may be delays with computers executing trades.

Investors should understand these risks before engaging in pre-market or after-hours trading.

24-Hour Trading Sessions

There are some markets with 24-hour trading sessions – notably, the global foreign exchange (forex) market. Unlike the stock market, the forex market doesn’t have a physical exchange, but rather, a bunch of large banks and brokerage firms that trade currencies with themselves.

Every week, the forex market begins in Auckland, New Zealand on Sunday (their Monday) at around 2:00 p.m. Eastern Time and moves around the world to the New York, United States on Friday at 5:00 p.m. Eastern Time. Trading in currencies moves between banks across these countries around the world before closing down for just one day per week.

The Bottom Line

A basic trading session is a period of time consisting of one day of business in a financial market, from the opening bell to the closing bell. But, there are many different exceptions to that rule, including pre-market and after-hours trading, different securities and derivatives, and even 24-hour markets like the foreign exchange market.