HFM information and reviews
Octa information and reviews
FXCC information and reviews
FxPro information and reviews
FBS information and reviews
Vantage information and reviews

The stock market after hours

21 December 2022

Every forex trader who turns their attention to stocks sees a daily break in the price line. The market closes and then opens at a different price the next day. What or who is moving the prices after closing time and what happens to pending orders that fall into the gap? Open and closing, not what you might think. With today’s technology, the idea that stock trading is not 24/7 might seem a little archaic. There’s always been a closing time, and there’s a good reason for it. Before we get into this, let’s clarify some terms of the pre-digital era. Investors are the ones with the money. Brokers were the entities with access to the stock market, and traders were the employees of the broker who represented their firm in “the pit.”

Back in the day, traders couldn't access the markets sitting on the sofa with a laptop. They needed a license and they had to go somewhere to make a trade. The New York Stock Exchange was the number-one place to go. Brokers sent traders to the stock exchange with a list of deals to be made for their investors.

Traders would mix and mingle, looking for another trader who is also trading on behalf of a client or investor. The trick was finding someone who wanted to buy what they were selling and vice versa. There were so many traders squeezed into that trading pit that they had to scream and shout over each other to find a deal. This pandemonium (for the uninitiated eye) was called Open Outcry.

Some traders with common portfolios even invented a sign language or hand signals that meant different things, including the asset, price, long or short, and the quantity of the order. When mobile phones became mainstream, the traders stood in the pit on calls with clients. Imagine those clients sitting in their quiet offices, screaming down the phone so the trader could hear over the noise of the pit. “SELL… SELL.” In response, the trader flashed hand signals to other traders, and a deal was made. The stress levels must have been off the charts, and took a heavy toll on the traders.

The market sleeps

The market sleeps because people need sleep. For the traders, it was 9:30am to 4pm full of borderline hysteria in the pit, followed by tons of paperwork at the brokerage office long after sundown. Limited hours made sense, but not just because of human limitations. Traders were in the same room at the same time, which created price competition. Price competition comes when there are plenty of buyers and sellers. The more participants you have in a market, the more liquidity, the more choice.

By limiting hours, it forced the trading volumes into short sessions that kept liquidity high, spreads low (or lower), and also capped volatility (on average) to safer ranges with less potential for manipulation. But times and technology changed, and global trading volume started rising.

The market went digital

The 80s. Computerized trading took over, and the New York Stock Exchange turned into a ghost town. The screaming faded, and orders got processed by data centers instead of on the trading floor. Even though the market could be easily accessed, NYSE chose to keep the trading hours limited. Even today, the standard trading times of 9:30 to 4 pm EST remain.

The main reason for standard operating times was always liquidity. Even as the public gained access to electronic trading platforms, having a defined market time kept liquidity high by forcing buyers and sellers together within a certain time frame. The digital era didn’t change the liquidity dynamic.

Market makers and big banks bring a lot of liquidity to the market, and everyone wanted a piece of that. In the 90s, NYSE realized that European and Asian investing houses wanted more, so they started offering extended hours trading. Soon it was clear that the low liquidity after-hours sessions were not suitable for all investors. Strategies were developed and analysts found ways to take advantage of the after-hours trading.

Is after-hours trading recommended?

Easy answer. No. Trading after hours can be dangerous to your portfolio. The majority of market makers are not trading, which means low market liquidity, wide spreads, and high volatility. Then there are the rumors of market influencing. It’s unconfirmed, but it’s something all experienced traders take note of. Many traders rely on technical analysis when forecasting entry and exit points. There are some common practices with technical traders, such as setting Stop Loss and Take Profit in relation to the current range. Analysts identify these points on the chart, and large organizations can easily sway market prices during after-hours and trigger those pending orders. 

Unlike with CFD trading, traders on NYSE need to find a buyer for anything they sell, and vice versa. Let’s say a bank wishes to offload AAPL stock which is stuck in a narrow price range. With relatively small volume (during after hours trading), they can fuel a price reversal, trigger pending buy orders at the time of market opening, and sell off their positions. This happens often, and it’s just one example of how a single firm can temporarily move the markets in its favor.

Another point worth noting is that companies sometimes announce big news after market hours, such as earnings reports. Late releases help to reduce momentary price spikes. The hours between the release and market-open provide time for investors and traders to digest the data and limit panic trading.

After-hours reports often lead to even more volatile trading than usual, often within the first few minutes of opening. Traders who had open orders from the night before often see stop outs in the first few minutes of the stock market opening, only to then see the market going in their direction after their order was closed. If you really want to participate in after-hours market volatility, set pending orders overnight, limit leverage, and set Stop Loss and Take Profit. Avoid companies that are releasing an earnings report during closed hours. Then strap in, and get ready for a bumpy ride at 9:30am EST.


Share: Tweet this or Share on Facebook


All eyes are on the strongest Cryptos
All eyes are on the strongest Cryptos

The crypto market continues to rise, adding 2.3% to the level of 24 hours ago. Bitcoin's capitalisation has surpassed 1 trillion, and its share of all coins is estimated at 52.5% by CoinMarketCap. The increase in share is due to USDT and the relative stagnation of the share of other cryptocurrencies outside the top five.

15 Feb 2024

Bitcoin Completes Consolidation and Rushes to the High
Bitcoin Completes Consolidation and Rushes to the High

The crypto market made an impressive move higher, rising 3.4% in 24 hours to $1.71 trillion. The rise to its highest level since 12 January came as the S&P500 and Nasdaq-100 indices hit all-time highs.

8 Feb 2024

Ethereum Unveiled: A Deep Dive into its Functionality and Significance
Ethereum Unveiled: A Deep Dive into its Functionality and Significance

In the ever-evolving landscape of blockchain technology and cryptocurrencies, Ethereum stands as a pivotal player, heralded for its decentralized global software platform and its native digital currency, ether (ETH)....

26 Jan 2024

Bitcoin halving 2024: What to expect?
Bitcoin halving 2024: What to expect?

BTC halving will occur when the number of blocks reaches 840,000 in April 2024. Then, the reward per block will decrease from 6.25 to 3.125 BTC...

25 Jan 2024

The Dollar Index Holds Steady Around 103.00
The Dollar Index Holds Steady Around 103.00

The dollar index is maintaining its position near the 103.00 mark, and market sentiment surrounding the US currency remains a topic of keen interest among traders and analysts...

25 Jan 2024

Tesla Shares Set to Decline on Disappointing Earnings, But a Bullish Turnaround May Be Imminent
Tesla Shares Set to Decline on Disappointing Earnings, But a Bullish Turnaround May Be Imminent

Tesla's Stock Braces for a Dip Amidst Lackluster Q4 Earnings Report Key Levels to Watch: October’s Low and Oversold Market Conditions. Tesla's stock concluded Wednesday's trading session with a downturn...

25 Jan 2024

Editors' Picks

The Top Forex Expert Advisors 2024: Performance, Strategy, and Reliability Review

An annual roundup reviewing the most successful Forex Expert Advisors (EAs) based on their performance, strategies employed, reliability, and user feedback. This piece would provide insights into which EAs have been market leaders and why.

The Evolution of Forex Expert Advisors: Navigating the Path of Technological Revolution

The concept of automated trading has been around for decades, but the accessibility and sophistication of Forex EAs have seen significant advancements in the past few years. Initially, automated trading systems were rudimentary, focusing on simple indicators like moving averages.

The Impact of EAs on Forex Trading: A Double-Edged Sword

By enabling continuous, algorithm-based trading, EAs contribute to the efficiency of the Forex market. They can instantly react to market movements and news events, providing liquidity and stabilizing currency prices through their high-volume trading activities.

MultiBank Group information and reviews
MultiBank Group
XM information and reviews
FP Markets information and reviews
FP Markets
FXTM information and reviews
AMarkets information and reviews
BlackBull information and reviews

© 2006-2024 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.