The stock market is the financial venue where publicly listed companies’ stocks, bonds, and other types of financial instruments are traded. However, stock investors don’t directly buy and sell on the stock market; they trade on stock exchanges, which are an internal part of the stock market.
Countries or regions have stock markets where brokers or individuals can exchange various financial instruments. Each has specific working hours for traders to buy or sell stocks, bonds, or other economic goods.
However, the rise of technology, especially online trading networks, increased the competition in this sector, thus bringing more demand. For that reason, stock exchanges allowed trading before and after the regular exchange hours.
What are Pre- and Post-Market Trading?
As mentioned, each market exchange has its own set operating hours. Almost all work from Monday to Friday, except the Saudi Stock Exchange, which trades from Sunday to Thursday.
Their start time usually revolves around 9 am and lasts till 5 pm. For example, the NYSE and NASDAQ start at 9:30 am and close at 4:00 pm. Some may even have lunch breaks between – more common for the Asian stock market – like the Shanghai Stock Exchange (SSE). This one begins at 9:30 am and till 11:30 am, after which they take a lunch break lasting until 1:00 pm and continue trading until closing time at 3:00 pm.
Pre-market trading allows brokers, investors, etc., to start trading earlier in the day, even before the stock market opens, which happens at around 4:00 am. On the other hand, post-market trading gives the opposite, i.e., it allows trading after the stock market closes and generally ends at around 8:00 pm.
Why Does Out-of-Session Trading Exist?
As technology took over the world, the stock market had to find a way to adapt to the change. Today, everyone can access news outlets or forex trading platforms such as Fazzaco that provide trading information.
This allows brokers and investors to get notified before anyone else of some company’s announcements, economic indicators, or other tips that may change the price of the stocks.
It also opens the door to many new investments, seeing that “the early bird gets the worm.”
The Benefits of Out-of-Session Trading
Pre- and post-market hours are conducted only through electronic communication networks (ECNs) and are usually attended by professional traders and those who have been in the business for some time.
The pre-and post-market sessions don’t have the same volume as the millions of trades conducted during regular hours. Nonetheless, traders gain several benefits from them.
First of all, out-of-session trading gives everyone a chance, even those who can’t trade during regular hours. This means that investors who have missed the starting bids can enter the market in the after-session, having an opportunity to buy or sell the financial investment.
The most significant advantage of pre- and after-hours trading is that it allows traders to enter the stock market immediately when news about a company’s financial development gets out. This includes acquisitions, mergers, drastic changes in the industry, predictions, and everything else that may influence the firm’s stock price.
It also gives traders a head start by allowing them to place orders the day before or early in the morning. Naturally, this also includes traders’ ability to shift between international stock exchanges.
How To Trade on The Pre- and Post-Market
The safest way to trade during these hours is through a broker. Today, almost all brokers have access to out-of-session trading. However, some may limit their trading on the stock exchanges.
If you want to trade as an individual, first do your research and learn about the sessions, what moves them, policies, macroeconomic events, etc. Then, build your pre-post-market strategy, open an account, and make your first trade.
Is Out-of-Session Trading for Everyone?
Out-of-session trading has a considerable influence on the regular-hours stock market. A large trade by one firm during these hours can significantly impact the stock’s price.
Although this type of trading has indicated a slight level of growth among brokers and other traders, it is still not advised to only trade during pre- or post-market hours. Considering that unpredictable factors may influence these sessions, there is high volatility in the stock price, which decreases their liquidity.
Moreover, regular stock market prices have a more fair value. Nonetheless, out-of-session trading can bring many benefits, especially for those more versed in the stock market. Plus, many brokers today can help even novice investors get in step with pre- and post-market trading.