how after hours trading affects the stock price
after hours trading often has an impact on the opening price for a stock at the beginning of the next normal trading session this is especially true if select events have occurred such as earnings release or extremely low liquidity as discussed above because after hours trading is usually done with a low amount of available shares after hours trading may result in stock movements that do not resolve until the subsequent day this price volatility may be temporary as the market may capture spikes in price to resolve liquidity shortages of securities once regular trading hours have opened after hours trading may also affect a stock price if the company has also released important news or earnings after the market has closed not only may this information positively or negatively impact the valuation of the security but traders may attempt to capitalize on this new information in some situations large enough news may invoke larger activity of after hours traders further increasing or decreasing the opening price on the subsequent day finally after hours traders may attempt to price discover the process where buyers and sellers negotiate a price based on available supply and demand this process may move the existing price of a stock after hours as each side sees what sentiments of a stock may be befoe its opening the following trading period after hours trading vs standard tradingthe table below highlights some of the key differences between trading after hours and during the normal trading session example of after hours tradinglet s take a real world example with nvidia nvda to show how after hours trading works though a historical example this situation adequately defines the opportunity traders may find in after hours trading and how early movement on news may yield benefits that are saturated by the time markets have opened to the general public nvidia s stock was greeted by a big jump in price after it reported its fourth quarter and annual results in 2019 market reaction led to a rise in the company s stock price to nearly 169 from 154 50 in the 10 minutes following the news 4the chart below shows that the stock s trading volume was steady in the first 10 minutes and dropped quickly after 4 30 p m during the first five minutes of trading around 700 000 shares were traded and the stock jumped nearly 6 however volume slowed materially with just 350 000 shares trading between 4 25 and 4 30 by 5 p m volume measured only 100 000 shares while the stock was still trading around 165 image by sabrina jiang investopedia 2020but when the market opened for normal trading the next morning traders and investors had a chance to weigh in on nvidia s results from 9 30 a m to 9 35 a m nearly 2 3 million shares were traded more than three times the volume in the initial minutes of the previous day s after hours trading the price dropped from 164 to 161 the stock proceeded to trade lower throughout the rest of the day closing at 157 20 that was just 3 higher than the previous day s close moreover it was a plummet from the nearly 15 increase made in the after hours session sadly nearly all of the after hours gains made by investors during that session had evaporated 