After-Market Trading, also known as After-hours trading is trading that takes place after the stock markets have closed. After-hours trading is used by many savvy Canadian investors but many describe it as a roses and thorns situation.
The stock market is an arrangement for investors and brokers to trade shares and other financial instruments for profit.
The Stock market is a highly specialized and regulated market. It runs on dynamic mechanisms that differentiate it from our regular shopping malls or grocery stores
After Market trading is one of such mechanisms. It refers to the stock trading that occurs after the official closure of the market.
What time does the Stock Market Close in Canada?
The Toronto Stock Exchange which is Canada, main equity trading outlet closes at 4:00 PM (Eastern Standard Time GMT-05:00).
The Toronto Stock Exchange opens on Weekdays for a total of 6hours 30 minutes only.
– 9:30AM to 4:00PM (Eastern Standard Time GMT-05:00).
– 6:30AM to 1PM (Pacific Time GTM -08:00).
Although most stock market dealings are done during regular operating hours, nowadays, Investors can also trade after-hours through the use of certain platforms.
After-Market Trading can offer convenience and other potential advantages, but it has some specialized rules, restrictions, and risks. If you intend to delve into the world of After-Market Trading, you should consider consulting a financial advisor.
How does After Market Trading Work?
During regular stock trading hours, investors and brokers can buy or sell stocks physically on the floor Toronto Stock Exchange and other exchanges in Canada.
After Market Trading, however, it can only be facilitated through digital channel markets called Electronic Communication Networks (ECNs).
Investors who engage in After-Market Trading typically do so between 4 p.m. and 8 am the following morning (Eastern Standard Time).
What is Considered After hours?
Any trade that takes place before the market opens or after it closes is considered an after-hours trade. It is also sometimes called the Extended hours trade. However, trading hours, vary from one Stock Exchange Market to the other.
Toronto Stock Exchange (TSX) Trading Hours
- Early trading. Weekdays from 7:00 a.m. to 9:30 a.m. Eastern Time (ET).
- Normal hours. Weekdays from 9:30 a.m. to 4:00 p.m. ET.
- Extended trading session. Weekdays from 4:15 p.m. to 5:00 p.m. ET.
Canadian Securities Exchange (CSE) Trading Hours
- Early trading. Weekdays from 7:00 a.m. to 9:30 a.m. ET.
- Normal hours. Weekdays from 9:30 a.m. to 4:00 p.m. ET.
- Extended trading session. Weekdays from 4:15 p.m. to 5:00 p.m. ET.
NASDAQ Trading Hours
- Early trading. Weekdays from 4:00 a.m. to 9:30 a.m. ET.
- Normal hours. Weekdays from 9:30 a.m. to 4:00 p.m. ET.
- Late trading. Weekdays from 4:00 p.m. to 8:00 p.m. ET.
New York Stock Exchange (NYSE) Trading Hours
- Tape A
- Pre-opening. Weekdays starting at 6:30 a.m. ET.
- Normal hours. Weekdays from 9:30 a.m. to 4:00 p.m. ET.
- Tapes B & C
- Pre-opening. Weekdays starting at 6:30 a.m. ET.
- Early trading. Weekdays from 7:00 a.m. to 9:30 a.m. ET.
- Normal hours. Weekdays from 9:30 a.m. to 4:00 p.m. ET.
What are the Rules of After Market Trading?
It is important to note that each ECN has its own rules.
Individual brokerages also have different rules set for extended hours of trading activities. An investor interested in extended-hours trading should check the specific broker’s policies to see what is allowed and what isn’t.
What Platforms Allow After Market Trading in Canada?
There are a number of platforms on which you can perform after-hours trades, including platforms like Questrade and TD DirectInvest.
When Can You Perform After Market Trading?
Each of these has different rules for when you can perform after-closing trades and what you can do during these hours.
Schwab for instance only allows after-hours trading from 4:05 p.m. to 8 p.m. Eastern Time.
Wells Fargo accepts trades from 4:05 p.m. until 5 p.m. Eastern Time.
TD Ameritrade offers trading 24 hours a day but only for five working days a week.
During regular market hours, traders can make many types of stock orders. For example, they can specify that an order must be completely executed or not at all. Whereas, in after-market trading, only unconditional limit orders are allowed.
It is also important that there is a much wider range of securities that investors can trade during regular market hours. For instance, TD Direct Invest’s extended hours trade only allows trading of a few exchange-traded index funds.
Is After Hours Trading More Expensive?
After Hours trading is certainly more expensive. Brokers charge higher, some of the ECN platforms that offer these trades may also charge some fees.
For example, E*Trade charges $0.0005 per share traded during extended hours.
How can I trade Stocks After-Hour?
If your broker offers an after-hours trading service, you’ll likely be asked to sign an agreement to use the ECN. You may also need to agree to talk by phone with a representative in a bid to explain the terms and rules to you clearly and ensure that you really know what you’re getting into.
After this is done, you may then place an order specifying the quantity, price, and limit.
It is strongly advisable to monitor the status of your order closely as some after-hours orders may not be completed due to the limited volumes. And notably, extended hours orders are only good for the one day that they are placed. They cannot be carried over to be completed the next day. You would have to place new orders all over again.
Trades completed during extended hours are considered to be completed on that date. The implication of this is that stock purchased after hours the day before its ex-dividend date is very well eligible to receive the dividend.
Why do people Trade Stocks After Hours?
- Quick Reactions to Material News of Events
Trading after the market closes allows investors to react quickly to news events. For instance, companies often release their earnings information after the market closes.
An after-market trader can take advantage of this before the regular markets can react significantly. This can yield impressive gains or avoid losses if the news is a material one.
Other news events that may influence after-hours trading include Takeovers, mergers, bankruptcy notifications, government reports on unemployment, and other events that can trigger stock movements after the closing bell.
After-hours traders can get a jump on these moves before the market re-opens the following morning.
- Convenience
Lastly, some investors trade during extended hours just for convenience. After-hours trade is generally characterized by fewer active traders. This can allow for a lot of conveniences. Some people may have busier schedules or any other commitments that prevent them from trading during regular hours.
What are the Risks Involved in After Hours Trading?
- Stock Price Volatility
Since much fewer people trade after hours, the volume of shares traded is also much lower. This causes a more pronounced price uncertainty and volatility than during regular hours.
A low volume of trade means that prices can move quickly and unexpectedly. It may also be difficult for traders to get trades executed at all because the securities available are very few. Also, the gap between the average bid and asked prices may be much wider than during regular market hours.
- Lesser Market Competitiveness
During regular hours, Prices quoted are consolidated from multiple trading venues across the world. Market markers may also help to ensure that traders get the best available price to buy and sell a particular stock.
Prices of stock after hours may reflect only prices available on a particular ECN. Those may be different from available average consolidated prices.
That can mean that share prices will open at many different prices when the regular market session begins.
Conclusion
After hours trading offers opportunities to make moves quickly on the back of significant news. But precaution must be taken as traders can be vulnerable if they act on unreliable information.
After-market trades can typically be vulnerable to cheap pump and dump schemes.
A rumor of a takeover may spark a price rise in the after-market. But the rise may simply fizzle when regular markets re-open if the rumor turns out untrue.
Another key advantage of trade during extended hours is that it is usually dominated by Expert traders. Investors often gain experience at trading during regular ‘sane’ market hours before testing their wits against the experts in the after-market.
Investing Tips
- Consider Your Options Carefully
After Market trading tricky. There are just as many opportunities in it for gargantuan profits as there are for catastrophic losses. There are many other ways to invest your hard-earned money beyond trading stocks after hours.
Take a step back to assess your risk tolerance and evaluate your options.
- Consult a Broker
Before you delve deep into a risky venture such as after-hours trading, ensure you speak to a specialist first to get a breakdown of the risks and have a look into the bag of tricks.
- Get an Investment Calculator
Pick out an Investment Calculator to also help you figure out your risk appetite and, ultimately guide you towards the kind of portfolio pool you should be casting your net into.
