After-Hours Trading – The Secret Trading Session To Make Profits
Traders have different techniques and approaches as they attempt to make the most profits from trading in stocks, bonds, currencies and other securities. Regardless of the preferred instrument of trading strategy, timing is the most important factor in these investments.
Finding the optimum time to execute your trading order can either get you some substantial gains or embark on a sinking market trend. The after-hours session is not known to many traders, but it is one of the best times to make investment decisions. How can you maximise your profits in after-hours trading? Let’s discuss.
What Are The After-Hours?
Most traders and retail investors engage in trading activities during regular market hours, usually between 9:30 and 16:00, which are the busiest times for exchanges and marketplaces. It is a common practice for traders to start trading during the first hours as they receive financial news and updates and make investing decisions.
However, most important news and announcements take place before or after these trading hours, when companies and corporations make critical statements and release information, especially by the end of the day.
Typically, trading markets have four trading periods: pre-market, normal pre-market, regular market, and after-hours. Sessions outside the regular hours have distinct characteristics because they experience lower activity and more financial news.
Companies release their crucial updates and statements in the after-hours period, when the market is mostly closed, to avoid major market shifts and volatility that might happen if these announcements were made during regular trading hours.
News like a company going public, mergers and acquisitions, and organisational restructuring can cause massive changes to trading patterns, largely affecting the company stock, which may result in unwanted consequences.
How to Start Trading in After-Hours Period
Trading after regular working hours was limited to selected entities like large financial institutions, entrepreneurs and central banks, who can capitalise on these opportunities. However, with the introduction of several technologies, almost any trader can now start after-hours trading.
The only difference is that you need a special electronic communication network (ECN) software, which routes you with brokerage firms and banks that have access to after-hours trading sessions.
Limitations to Trading in After-Hours
Using ECN to trade in an after-hours session is similar to doing so in regular hours. However, there are some limitations.
- Any assigned limit orders cannot be carried to the next day, and traders have to execute these orders, or they will be voided.
- Prices have a limited trading range determined by markets and issuing companies to avoid market manipulation and missing these opportunities.
Conclusion
The after-hours session is a less-known trading period where a limited number of financial corporations and investment firms trade after the regular hours are concluded. Trading in these times is beneficial because most companies announce their news and updates after the market closes.
After-hours trading can be done using an ECN network that connects traders with brokers and institutions that have access to this trading session. However, there are some limitations to avoid market manipulation and to promote integrity and acting in good faith.
