After-hours trading is a great way to trade after the stock market closes. Many investors find that news and economic indicators are available late at night, and the news can have a significant impact on the price of an asset. After-hours trading allows you to participate in this market when the market is closed, which can give you an advantage over other investors.
After-hours trading is different from regular trading, in that fewer investors are active. Liquidity levels are much lower and the bid-ask spread is often wider. This can result in volatile prices and a difficult time filling your orders. This is especially true for illiquid securities, which often have wide bid-ask spreads. In addition, large influential investors may not be active during the after-hours session. This can lead to heightened volatility in the price of the security and greater losses for less experienced investors.
Traders should know what kind of order to place during after-hours trading. Only limit orders are allowed during this time. Stop-limit orders and special conditions are not accepted. After-hours orders are good only for that session. It is a good idea to know the risks and rewards of after-hours trading before taking a plunge.
Most prominent brokerages offer after-hours trading. Some allow after-hours trading between 4:05 p.m. ET and may even go as late as eight p.m. ET. Typically, however, after-hours trading is low-volume, and without a catalyst, it can be risky.
After-hours trading is especially advantageous if you want to profit from breaking news or an unexpected event. There are substantial liquidity-related risks involved, so after-hours trading is not recommended unless you have a clearly defined strategy. If you want to get involved in after-hours trading, consider one of the many platforms that TD Direct Investing has to offer. For instance, their streamlined mobile-only app makes it simple to trade after-hours.
As after-hours trading is more volatile than regular trading, it is important to make sure you use limit orders. This will prevent you from making purchases or sales at prices you don’t want to pay. If you don’t have limit orders, you may have difficulty getting your orders executed and may end up paying a much higher price than you intended.
Most speculators will focus on the major currencies during their trading sessions. In particular, they will look at the Australian and New Zealand dollar sessions, which are the most liquid during these times. Other currency pairs that will be of interest to investors are the Canadian dollar and the Japanese Yen. This is because these are the two currencies that have the largest demand in the world.
After-hours trading is a great way to capitalize on opportunities that may not be available during regular market hours. Since markets may be illiquid after the close of regular trading, this type of trading may result in wider spreads on some currency pairs.