Taking Advantage of Stocks Moves After the Close
Trading moves in the after-hours would be the Wild West of stock trading. If volume is low(er) and fewer traders are participating in buying stocks, moves can be extreme and rapid. It means a large risk but also profit possible, and in some situations, it may be hard to even determine what risk is.
Before trading the aftermarket movers, let’s first consider what”after hours” is? Is it that stocks move ? The way to find later hours (big) movers as well as the advantages and disadvantages of trading after hours and some trading strategies.
Post market movers
01 After Hours Trading Robot
Quiet trading floor before market trading starts
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Normal stock exchange trading hours in the US are between 9:30 AM EST and 4 PM EST.. It’s when the New York Stock Exchange (NYSE) and NASDAQ markets see that the most trading activity, as institutions and banks are also open during this time. It is also the period for which opening and closing prices are quoted (on sites and in newspapers). The price at 9:30 AM is available, and the cost at 4 PM is shut.
While this time period provides the official open and shut and most of the volume occurs between those days, trading takes place outside these hours.
Pre-market trading is from 4 AM (NASDAQ) and 7 AM (NYSE, however 4 AM to get NYSE ARCA securities) EST to 9:30 AM EST.. The stock market trades its hours. Trading that occurs between 4 PM EST and 8 PM EST is known as after hours or Forex trading.
02 Stocks Move After Hours
Financial analyst study data published after market hours.
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There are may be dealers who want to get into or out of positions, which keeps the action going after the close. It might happen in stocks that do millions in volume a day. These high volume stocks could have some activity each day. Many stocks, particularly ones with lesser volume during the official session, may have.
News events, such as earnings, are often released after hours. Earnings can cause movements and are a key metric which investors and institutions use to ascertain if they want to purchase or sell a stock exchange.
When earnings are released after hours, traders try to act on the information (hoping to get a jump on the majority of the investors and traders who won’t be trading until the next day). It causes large and rapid moves in the share price. Day traders who seem to enter and exit trades for a profit are also attracted by this volatility.
Stocks move during the session that is standard they move after hours for the same reason — folks are currently buying and selling.
It’s important to note that simply because people can exchange after hours, doesn’t mean trading occurs in most stocks. When there’s little interest in a stock, it might have no after-hours trades (recall, to get a transaction to occur there should be a buyer and seller that are prepared to transact at precisely the same price). While earnings in businesses produce a lot of after-hours activity, earnings in a small firm may not draw in any after-hours trades at all.
03 Finding After Hours (Big) Movers
Clock showing the market is in After-Market trading hours.
Westend61 / Getty Images
For traders interested in jumping into trades or day traders that are interested in trading the earning volatility, you’ll find a couple of places to look.
Companies publish, in advance, when they’ll be releasing earnings (and if it will be after hours). All earnings are recorded on Yahoo! Finance.
Dealers can also track stocks which are moving after hours.
Most trading and charting programs provide some form of the pre-market and after-hours list that is busy. Check with your broker and/or platform provider if this operation is available to you to find out.
Earnings in companies offer the best trading opportunities as stated previously. Cost movement and volume are needed, so if no one cares about the stock then the volume isn’t likely to be there (even though a few traders may cause the price to proceed ).
04 Pros and Cons of Trading After Hours
Chart showing the motion in a stock after the market closed.
TradingView
There’s one major benefit to trading after hours, which is:
Less competition
With active dealers, an individual may nab once liquidity moves the industry 23, prices that may not be accessible.
This advantage comes with a drawback. Competition means:
Less quantity
Erratic price moves
Although it is possible to find some positive rates and transactions later, you might also be on the losing end of that deal (you might be the one providing a fantastic cost to somebody else). With quantity and wild price swings, if you end up on the wrong side of a movement it could be devastating. There might be a lot of volume at the stock total, but not necessarily at the price that you want to get in or out at.
Another disadvantage is that what seems like a simple trade on a graph might not be. The chart indicates an earnings release right after the bell. In the very first minute after the release, the price jumps more than $2.75, but only about 10K volume. That means hardly any people could obtain this inventory (or cover short positions). In the next minute, the price moved up by more than $1.50, and 14K stocks changed hands. Within the next moment, the price rallied more than $2.15 on 27K. This may look like decent volume, but with a lot of institutions and traders all attempting to purchase hardly any shares over a period of $6.50, it is challenging to catch a piece of a pie.
Since the stock price begins to settle down around 4:15 PM (16:15 about the chart), more traders are capable (or willing) to participate and volume increases. There was still ample movement for transactions, though lots of the movement had already happened by 4:15 PM. Between 4:15 PM and 5 PM the inventory covered a more than $0.80 range.
The con here is that the huge moves are tough to get in on. The expert is that there’s normally a chance to get some trades in once the first pandemonium has escalated and there’s still quantity (or raising volume).
05 How to Trade in After Market Hours
Chart showing Impulse-Pullback-Consolidation on 1-Minute Stock Chart
TradingView
Some dealers opt to develop specific strategies for trading after hours or for information events, but generally the most after-hours strategies employed will probably be quite similar to those utilized during regular trading hours.
Traders might elect to utilize a news-related plan or a trend following strategy. While the strategy guidelines will be the exact same for trading after hours and during market hours, then traders should make accommodation for spreads, lower volume, and price moves when trading after hours. Prevent losses ineffective, which means an increased probability of losses could be rendered by these factors. For this reason, think about lowering your position size (from what you would normally trade during regular market hours) if trading after hours.
06 Final Word Trading After Hours
Hours can be worked by Dealers at trading desks.
Tetra Images / Getty Images
In US stocks trading occurs between 4 PM and 8 PM. That doesn’t mean all stocks have trades that take place while following hours trades can be placed during this time. Most stocks really do not. Following 4 PM most stocks are ghost towns, with nobody prepared to buy or sell anywhere close to the day’s price.
Stocks that do millions of shares a day may see some activity after the closure.
Earnings can cause enormous price moves and attract a lot of traders (volume) into stock after hours. But again, not all stocks will undergo enough volume to warrant after hours.
Use strategies to what you use intraday, but pay special attention to the probability of price moves that are bigger quantity, and increased spreads. Consider lowering your place size to compensate.
