Pre-Market & After-Hours Trading: What You Need to Know

Views 2022Nov 28, 2024

Investors can trade during standard hours from 9:30 a.m. to 4 p.m. ET on weekdays on major exchanges like NYSE and Nasdaq, which are closed on weekends and holidays. However, markets can be influenced by events at any time, and electronic trading has expanded to allow extended-hours trading, letting investors react to news outside regular hours.

What time does the stock market open?

U.S. hours are between 9:30 a.m. to 4 p.m. Eastern Time (ET).

What is pre-market and after-hours trading

Pre-market and after-hours trading refer to trading sessions that occur outside the standard trading hours of 9:30 a.m. to 4:00 p.m. ET on U.S. exchanges. These sessions allow investors to react to news and events that happen outside of regular hours, providing more flexibility for trading.

What is pre-market trading

Premarket trading typically takes place between 4:00 a.m. and 9:30 a.m. ET on most U.S. exchanges, though some brokers may limit access to certain hours within this window.

During this time, investors may buy or sell securities in response to news, earnings reports, or other events that occur before the market opens. For example, major announcements about earnings or mergers are often made early in the morning.

This session often has lower trading volumes and higher volatility, which can lead to wider bid-ask spreads (the difference between the price a buyer is willing to pay and the price a seller is willing to accept). These conditions can make pre-market trading riskier, especially for less liquid stocks.

What is after-hours trading

After-hours trading (also known as post market trading) usually occurs from 4:00 p.m. to 8:00 p.m. ET. This session allows investors to react to news released after the market closes, such as earnings reports, economic data, or significant corporate announcements.

Like pre-market trading, after-hours trading typically has lower liquidity and higher volatility. This can result in greater price fluctuations and wider bid-ask spreads. Some stocks might have very limited after-hours activity, while others, especially large-cap stocks or stocks with breaking news, can be more actively traded.

Trading outside of regular hours can be advantageous for responding to events quickly, but investors should be aware of the potential for increased risk and less favorable pricing in these sessions.

How pre-market and after-hours trading works

Pre-market and after-hours trading can serve as useful tools for experienced investors seeking to respond to news outside regular trading hours. Trading sessions allow investors to trade stocks outside the regular trading hours. However, they require caution due to the potential for high volatility and unpredictable price movements.

A reminder: What time does the stock market open? U.S. hours are between 9:30 a.m. to 4:00 p.m. Eastern Time (ET).

Pre-market trading

Many brokers only allow limit orders during pre-market hours to minimize risks due to lower liquidity and price swings. A limit order is an instruction to buy or sell a security at a specific price or better. Limit orders can be placed as either a buy or a sell order.

With fewer participants, liquidity is lower leading to wider bid-ask spreads and increased volatility. Pre-market trading can reflect how a stock might perform at the open but carries risks due to unpredictable price movements and the potential for unfilled orders.

After-hours trading

This period often sees activity from earnings reports, company announcements, and economic data released after 4:00 p.m. ET.

Trades in after-hours typically involve limit orders and face lower volume, which can cause wider bid-ask spreads and larger price swings, making it harder to get desired prices. These sessions can indicate potential opening prices, though they sometimes differ when regular trading begins due to increased liquidity.

Why some investors participate in pre-market and after-hours trading

Investors engage in pre-market and after-hours trading to react quickly to news to try to take advantage of price movements outside regular hours. These sessions allow them to adjust positions based on overnight announcements, providing insights into market performance at the open. Some traders aim to profit from the higher volatility in these periods, though this requires experience due to lower liquidity.

For retail investors, extended hours offer flexibility to manage investments around their schedules. Hedge funds, institutions, and high-frequency trading algorithms also participate, aiming to capitalize on rapid price shifts driven by news.

How to find and trade pre-market and after-hours markets

At moomoo, users can trade pre-market and after-hours markets.

Go to Markets> Stocks> Featured Lists

trade pre-market and after-hours markets on moomoo

Images provided are not current and any securities are shown for illustrative purposes only and is not a recommendation.

Under Featured Lists, you have the option to click on Pre-Market or After-Hours. If you click on these two tabs, you can view the top pre-market and post-market gain rankings and pre and post-market decline rankings.

Please note that to access this information, on the app (through a mobile phone), go to Quotes>Market - US stocks>pre-and post-market list. And for the desktop, go to Market>US stocks>US stocks hotspots.

At moomoo, US stock trading hours include the pre-market trading session, the continuous trading session, and the after-hours trading session. When placing a pending order, investors can choose whether to allow it to be active in the pre-market and after-hours trading sessions (whether to allow fill outside regular trading hours (RTH)).

Orders placed during these extended hours will be submitted to the stock exchanges for matching. Nasdaq has specified its own pre-market and after-hours trading sessions. Different brokerage firms have different requirements for these sessions.

Moomoo Financial Inc. has the following rules:

U.S. stock pre-market trading session: 4:00 a.m to 9:30 a.m. ET
U.S. stock after-hours trading session: 4:00 p.m. to 8:00 p.m. ET
U.S. stock after-hours trading session for half-day trading: 1:00 p.m. to 5:00 p.m. ET

Potential benefits and risks of pre-market and after-hours trading

Potential benefits

Pre-market and after-hours trading let investors respond to news, earnings, and economic reports immediately, without waiting for regular hours. This can create opportunities to act on significant price movements from breaking news or earnings surprises. These sessions also offer flexibility for those unable to trade during the day and may provide an early indication of market sentiment, helping traders prepare for the regular session.

Potential risks

Fewer traders participate in pre-market and after-hours sessions, resulting in low trading volumes and limited liquidity. This can lead to wide bid-ask spreads, making it harder to buy or sell without significant price changes, and orders may not be filled as expected. The low liquidity also contributes to increased volatility, where prices can swing widely due to large trades.

Many brokers restrict trades during these hours to limit orders, and some stocks may be unavailable for trading. Price reactions to news during these sessions can be exaggerated, often reversing once the regular market opens. Individual investors face added challenges competing with institutional traders and high-frequency algorithms, which often have faster access to information and trading tools.

FAQs about pre-market and after-hours trading

What time is the pre-market and after hours?

Pre-market and after-hours trading times vary depending on the broker. Please note that for anyone interested in trading during these hours, they should be fully informed of the specific exchange and appropriate broker rules limitations and fees before trading.

Here are general guidelines for U.S. markets:

Pre-market trading

Typical Time: 4:00 a.m. to 9:30 a.m. ET
Major exchanges: Nasdaq and NYSE offer pre-market trading, with the session ending at the start of the regular trading day at 9:30 a.m. ET.

After-hours trading

What time does the stock market close? 4:00 p.m. ET
Typical time for after-hours trading: 4:00 p.m. to 8:00 p.m. ET
Major exchanges: After-hours sessions begin once the regular market closes at 4:00 p.m. ET and run until 8:00 p.m. ET.

Why do stocks sometimes jump after hours?

Stocks can experience large price movements after hours due to key events that influence investor sentiment. For example, earnings reports released post-close often lead to quick reactions if they surprise investors, potentially causing significant price changes. News on mergers, executive changes, or regulatory actions can also impact perceived company value outside regular hours.

Economic data like jobs reports or Federal Reserve announcements released off-hours can affect overall market sentiment, influencing stock prices in after-hours trading. However, with fewer buyers and sellers in these sessions, the reduced liquidity can cause exaggerated price swings. Institutional investors and high-frequency algorithms, active during these times, often drive early reactions to news, which can influence prices before the broader market opens.

How does pre-market and after-hours trading affect stock prices?

Pre-market and after-hours trading can create significant price changes that might set the tone for regular trading, reflecting early reactions to news, market sentiment, and institutional trading. However, due to lower liquidity and the potential for overreactions, these movements can be more volatile and may not always hold once the market opens.

Is pre-market trading a good indicator?

Pre-market trading can offer clues—especially for understanding investor sentiment and initial reactions to news—it’s best used as one part of a broader strategy. Monitoring pre-market trends alongside other indicators, such as trading volume, economic data, and technical levels, can provide a more reliable picture of potential market movements.

Can you place buy orders during pre-market hours?

Yes, investors can place orders to buy and sell stocks during pre-market hours, typically from 4:00 a.m. to 9:30 a.m. ET for major U.S. exchanges like the NYSE and Nasdaq. However, these hours may vary depending on the broker, and not all brokers offer access to the entire pre-market session. Traders should use caution due to the risks associated with low liquidity and high volatility in these early hours.

Trading during Extended Hours Trading Sessions (including the Pre-Market Session (Monday through Friday 7:00 a.m. to 9:30 a.m. ET), the After-Market Session (Monday through Friday 4:00 p.m. to 8:00 p.m. ET), and the Extended Hours Overnight Session (Sunday through Thursday 8:00 p.m. to 7:00 a.m. for certain ETFs), in each case subject to holiday trading hours), carries unique risks, such as greater price volatility, lower liquidity, wider bid/ask spreads, and less market visibility, and may not be appropriate for all investors. Moomoo Financial Inc. cannot guarantee that Extended Hours orders will be executed at the best price for any given security or that any such orders, including market orders, will be executed at all. By requesting access to enter orders and entering any order during Extended Hours Trading with Moomoo Financial Inc. you acknowledge that you understand the risks of trading during Extended Hours Trading Sessions, including those described in the Extended Trading Hours Risk Disclosure and agree to the terms and conditions set forth therein in the Customer Agreement.