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How to Tra­de the After-Mar­ket Movers

Taking Advan­ta­ge of Stocks Move­ments After the Clo­se

Big moves at the after-hours would be the Wild West of stock tra­ding. When quan­ti­ty is low(er) and fewer tra­ders are enga­ging in purc­ha­sing stocks, moves can be ext­re­me and rapid. It means a threat but also big pro­fit poten­tial, and in cer­tain sce­na­rios, it may be very dif­ficult to even deter­mi­ne what that risk is.

Befo­re inves­ting the after­mar­ket movers, let’s first con­si­der what“after hours” is? Why do stocks proceed ? The way to find later hours (lar­ge ) movers and the advan­ta­ges and disad­van­ta­ges of tra­ding after hours and some tra­ding stra­te­gies.
Article mar­ket movers
01 After Hours Tra­ding Robot
Qui­et tra­ding floor prior to mar­ket tra­ding begins
Spencer Platt/Getty Ima­ges
Regu­lar stock mar­ket tra­ding hours in the US are between 9:30 AM EST and 4 PM EST.. It is when the New York Stock Exc­han­ge (NYSE) and NAS­DAQ mar­kets see that the most tra­ding action, as banks and ins­ti­tu­tions are also open during this time. It’s also the period for which ope­ning and clo­sing prices are offe­red (on sites and in news­pa­pers). The price at 9:30 AM is open, and the cost at 4 PM is clo­se.

Whi­le this period of time pro­vi­des the official clo­se and open and near­ly all of the quan­ti­ty hap­pens between the­se days, tra­ding also occurs 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 then tra­des its hours. Tra­ding that occurs between 8 PM EST and 4 PM EST is known as after after­mar­ket tra­ding or hours.

02 Why Stocks Move After Hours
Financial ana­lyst research data publis­hed after mar­ket hours.
B Busco/Getty Ima­ges
The­re are may nevert­he­less be dea­lers who want to get into or out of places, which keeps the action going after the clo­se for one hour or more. It may hap­pen in stocks which do mil­lions. The­se lar­ge volu­me stocks may regu­lar­ly have some after­mar­ket acti­vi­ty eve­ry day. Many stocks ones with quan­ti­ty during the ses­sion, may have no tran­sac­tions that take place.

News events, such as ear­nings, are dischar­ged after hours. Ear­nings can cause moves in the purc­ha­se price and are a crucial met­ric which ins­ti­tu­tions and inves­tors use to deter­mi­ne whet­her they want to purc­ha­se or sell a stoc­kexc­han­ge.

When ear­nings are relea­sed after hours, tra­ders try to act on the infor­ma­tion (expec­ting to get a jump on the majo­ri­ty of the inves­tors and tra­ders who won’t be tra­ding until the fol­lowing day). It causes rapid and sizable moves at the sha­re price. Day tra­ders that seem to enter and exit tra­des for a pro­fit are also att­rac­ted by this vola­ti­li­ty.

Ulti­ma­te­ly, stocks proceed during the ses­sion they move after hours for the same rea­son — folks are buying and sel­ling.

It is impor­tant to note that because people may tra­de after hours, doesn’t mean tra­ding takes place in most stocks. If there’s litt­le inte­rest in a stock, it might have no after-hours tra­des (remem­ber, to get a tran­sac­tion to occur the­re must be a buyer and sel­ler that are pre­pa­red to tran­sact at the exact same price). Ear­nings in a small com­pa­ny may not draw in any after-hours tra­des whi­le ear­nings from lar­ge com­pa­nies crea­te a lot of action.

03 Fin­ding After Hours (Big) Movers
Clock is in tra­ding hours.
Westend61 / Get­ty Ima­ges
For day tra­ders who are thin­king about tra­ding the ear­ning vola­ti­li­ty, or dea­lers inte­res­ted in jum­ping after ear­nings, you’ll find a couple places to look.

Com­pa­nies publish, in advance, when they will be relea­sing ear­nings (and if it will be after hours). All ear­nings are recor­ded on Yahoo! Finance.

Tra­ders may also moni­tor by chec­king the NAS­DAQ After Hours Most Acti­ve lis­ting or the Mar­ketWatch After Hours Scree­ner stocks that are moving.

Char­ting pro­grams and most tra­ding also pro­vi­de some form of the pre-mar­ket and list. Check to see whet­her this func­tio­na­li­ty is avai­lable to you.

As men­tio­ned abo­ve, ear­nings in com­pa­nies that are well known typical­ly offer the very best tra­ding oppor­tu­ni­ties. Cost move­ment and volu­me are requi­red, so if no one cares about the stock then the quan­ti­ty is not going to be the­re (even though a few tra­ders may get the price to move).

04 Pros and Cons of Tra­ding After Hours
Chart showing the move­ment in a stock after the mar­ket clo­sed.
Tra­ding­View
There’s one advan­ta­ge to tra­ding after hours, and that is:

Less com­pe­ti­tion
With acti­ve tra­ders, prices which might not be avai­lable once liqui­di­ty moves the mar­ket again can be nab­bed by an indi­vi­dual.

Unfor­tu­na­te­ly, this advan­ta­ge also has a down­si­de. Less com­pe­ti­tion means:

Less quan­ti­ty
Erra­tic price moves
Alt­hough it is pos­sible to find some favo­rable rates and tra­des after hours, you could also be on the losing end of that deal (you might be the one giving a fan­tas­tic cost to some­bo­dy else). With volu­me that is irre­gu­lar and wild price swings, if you end up on the wrong side of a move it can be devas­ta­ting. The­re might be lots of quan­ti­ty at the stock total, but not neces­sa­ri­ly in the price you wish to get out or in at.

Anot­her con is that what seems to be a simple tra­de on a chart may actual­ly not be. The graph indica­tes an ear­nings relea­se short­ly. In the very first minu­te after the launch, the price jumps more than $2.75, but only on 10K volu­me. That means very few indi­vi­duals could obtain this stock (or cover short posi­tions). In anot­her second, the price moved up by more than $1.50, and 14K stocks chan­ged hands. In the next minu­te, the cost ral­lied more than $2.15 on 27K. This may look like decent volu­me, but with a lot of tra­ders and ins­ti­tu­tions all trying to buy very few stocks over a period of $6.50, it is chal­len­ging to catch a piece of a pie.

Since the stock price starts to repay around 4:15 PM (16:15 on the chart), more dea­lers are able (or wil­ling) to take part and quan­ti­ty inc­rea­ses. Though lots of the motion had alrea­dy hap­pe­ned by 4:15 PM, the­re was still con­si­de­rable move­ment for tra­des. Between 4:15 PM and 5 PM the inven­to­ry cove­red a more than $0.80 ran­ge.

The con here is that the 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 is still volu­me (or inc­rea­sing quan­ti­ty ).

05 How to Tra­de in After Mar­ket Hours
Chart showing Impul­se-Pull­back-Con­so­li­da­tion on Stock Chart
Tra­ding­View
Typical­ly the most stra­te­gies will be simi­lar to tho­se, alt­hough some dea­lers choo­se to come up with speci­fic stra­te­gies for tra­ding after hours or to get infor­ma­tion events.

Tra­ders may opt to uti­lize a plan or a trend fol­lowing stra­te­gy. Whi­le the plan gui­de­li­nes are the exact same for tra­ding after hours and during regu­lar mar­ket hours, then tra­ders must make ext­ra accom­mo­da­tion for spreads, lower quan­ti­ty, and cost moves when tra­ding after hours. The­se variables could ren­der pre­vent los­ses inef­fec­ti­ve, which sig­ni­fies an inc­rea­sed pro­ba­bi­li­ty of los­ses. For this rea­son, think about reducing your posi­tion size (from what you would nor­mal­ly tra­de during regu­lar mar­ket hours) if tra­ding after hours.

06 Last Word Tra­ding After Hours
Tra­ders at tra­ding desks may ope­ra­te non-stan­dard hours.
Tet­ra Ima­ges / Get­ty Ima­ges
In US stocks tra­ding occurs between 4 PM and 8 PM. Whi­le after hours tra­des can be set during this time period, that doesn’t mean all stocks have tra­des that take place. Most stocks real­ly do not. After 4 PM stocks are ghost towns, with nobo­dy wil­ling to buy or sell anyw­he­re near the clo­sing price of the day.

Stocks that do lots of mil­lions of sha­res per day may see some acti­vi­ty fol­lowing the clo­se.

Ear­nings can cause big price moves and att­ract a lot of dea­lers (volu­me) into stock after hours. But not all of stocks will expe­rience enough volu­me to jus­ti­fy after hours.

Use simi­lar stra­te­gies to what you uti­lize int­ra­day, but pay atten­tion to the pos­si­bi­li­ty of lower volu­me inc­rea­sed spreads, and lar­ger price moves. Think about lowe­ring your place size to com­pen­sa­te.