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
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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.
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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.
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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.
There’s one advantage to trading after hours, and that is:
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:
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
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.
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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.