how to trade after hours
to trade stocks after hours you need to have an account with a brokerage firm that offers after hours trading not all brokerage firms offer this service check with your broker to see if they provide after hours trading in addition each brokerage firm that offers after hours trading may have varying hours so ensure you understand when after hours trading is allowed the process for placing an order in after hours trading is similar to placing an order during regular trading hours however there are some important differences assuming your brokerage firm offers after hours trading you can place orders through their online trading platform most importantly not all order types are usually available during after hours trading for example limit orders may not be available and market orders may only be partially filled due to the order book s lack of liquidity for example charles schwab does not allow stop stop limit fill or kill immediate or cancel or all or nothing orders there are several things to consider when you trade in an after hours session including volume price and participation in after hours trading the trading volume for a stock may spike on the initial release of news but most of the time thins out as the session progresses the growth of volume generally slows significantly by 6 p m so there is a substantial risk that investors will be trading illiquid stocks after hours not only does volume sometimes come at a premium in the after hours trading sessions so does price it is not unusual for the spreads to be wide in the after hours the spread is the difference between the bid and the ask prices due to fewer shares trading the spread may be significantly wider than during the normal trading session if liquidity and prices weren t enough to make after hours trading risky the lack of participants may do the trick that s why certain investors and institutions may choose not to participate in after hours trading regardless of news or events it s quite possible for a stock to fall sharply in the after hours only to rise once the regular trading session resumes the next day at 9 30 a m many big institutional investors have a certain view of price action during after hours trading sessions and express that view with their trades once the regular market re opens since volume is thin and spreads are wide in after hours trading it is much easier to push prices higher or lower fewer shares and trades are needed to make a substantial impact on a stock s price that s why after hours orders usually are restricted to limit orders if your brokerage doesn t restrict them consider them anyway as a means to protect yourself from unexpected price swings and order fills advantages and disadvantages of after hours tradingthe ability to place trades and have them filled in trading sessions that occur after normal stock exchange business hours can be important to some traders and investors after hours trading offers certain advantages if the electronic communication network you use for after hours trading suddenly becomes unavailable for technical reasons your broker may try to direct orders to other participating ecns so that they can continue to be filled if this isn t possible a broker may find it necessary to cancel all orders entered for the after hours session make sure you understand the risks associated with after hours trading before you start bear in mind that these drawbacks are on top of the inherent risks of stock trading some brokerages require that investors accept the ecn user agreement and speak with their brokerage representative before they re allowed to trade so that they fully grasp and accept those risks 3may allow investors to take advantage of being early to an opportunityoffers greater convenience to traders instead of restricting trades to select hoursmay present greater profit opportunities due to higher volatilityallows investors to move when new market information is presentedoften results in low liquidity of an security making it more difficult to transact withoften results in greater price volatility due to greater bid ask spreadsmay result in greater competition due to limited availability of sharesmay result in restrictions due to your broker