What is Extended Trading?
Trading conducted by the electronic networks before or after the normal trading hours of the stocks is called extended trading. The volume of Extended Trading is much less than trading in regular hours. One can look at exthoursranking to trade during the extended hours.
Types of Extended Trading
Extended Trading is of two times based on the time when stocks are traded. The two types are:
- Pre-Market Trading: Trading of stocks between 4:00 a.m. and 9:30 a.m. Eastern Time is called Pre-Market Trading.
- After-Hours Trading: The trading of stocks between 4:00 p.m. and 8:00 p.pm Eastern Time is called After Hours Trading.
During both these types of tradings, the volume of trade is very low.
Some facts about EXT Trading
Some facts about EXT or Extended Trading are:
- It occurs on the market (electronic market) after and before the regular trading time of exchange of stocks.
- The hours of EXT Trading vary based on which security or asset is being traded. In the US, stock exchanges occur from 9:30 a.m. to 4:00 p.m. EST. Extended trading is done outside these trading hours.
- The lower volume of trade can increase volatility and risk. However, it can present provide opportunities for astute trader too.
The majority of the extended trading occurs just before and just after the regular hours. Reason being that the news affecting investors comes just before or just after the closing of the market.
ECN (Electronic Communication Networks) has democratized the hours for extended trading and retail investors have opportunities to place trades outside the regular trading hours. The EXT Trading allows investors to react immediately to events and news even when the exchange is closed.
Brokers have to enter limit day orders at the time of extended trading sessions due to the risk because of a lack of liquidity.
Further, many brokers limit EXT Trading on Reg NMS securities. Many types of funds, Over-the-counter securities, and some other options and markets may be off-limit at the time of extended trading.
As discussed, Extended Trading can be very risky. Some risks associated with it are:
- Limited Liquidity
- Increased Volatility
- Large Spreads
- Uncertain Prices
- Professional Competition
All these risks for online trading can become an opportunity if the participant can make the right decision. For example, if a stock closed at $44, a bid to buy the stock at $43 or $42 may get triggered during the extended trading. Someone willing to sell might sell it at $42 though the price was $44 a few minutes ago. Further, the next day, the stock might open again at $43. The exthoursranking at https://www.webull.com/quote/exthoursranking can help to decide which stock to buy.