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Narrator: So, you're interested in buying a stock and you're ready to place the order, but the market has already closed for the day. What do you do?
I'm Trading Consultant Alexandra Adams, and this is Comment Below.
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Narrator: We've gotten a lot of questions about how trading hours work, so we figured we'd dive into the world of trading outside of normal trading hours. Can it be done on Schwab.com?
Yes, but there is some nuance. Let's break down the actual hours you can trade, the securities you can trade, the order types you can use, and how it all works together.
So, regular market hours are considered 9:30 a.m. to 4 p.m. Eastern Time. That's because the New York Stock Exchange—and most other exchanges for that matter—are based in New York City.
That means early mornings for West Coast traders and late nights for European traders.
But you can trade outside of these normal hours in what's known as extended-hours trading.
Typically, pre-market runs from 4 a.m. Eastern Time to the opening bell, and after-hours trading lasts from the closing bell to 8 p.m. Eastern, though times may differ so check with your brokerage.
At Schwab, premarket orders can be placed between 8:05 p.m. on the previous trading day and 9:25 a.m. ET. These orders will be eligible for execution between 7:00 a.m. and 9:25 a.m. ET. After-hours orders can be placed and are eligible for execution between 4:05 p.m. and 8:00 p.m. ET.
Timing also depends on the security you're looking to trade: Some don't trade outside of regular hours at all, and some trade 24 hours a day, five days a week.
Billions of shares are traded every day during regular hours on the U.S. exchanges alone. So why might you trade during extended hours?
Well, for starters, it's convenient. If you have a day job, it can be pretty tough to stay on top of every market move while you're at work.
Extended-hours trading also lets you react in real time to market news like company earnings reports, leadership changes, or new product launches.
These announcements are typically made outside of market hours on purpose to give investors time to absorb the information and hopefully avoid reactive trading and excessive volatility.
But there are some disadvantages to extended-hours trading too.
Orders may be partially executed or not at all. Liquidity tends to be much lower, bid/ask spreads much wider, and volatility much higher. Take a look at DoorDash. Its stock price jumped from $114 to $128 after hours between May 13 and May 14, 2021. Or look at GameStop a few months earlier. On January 27 and 28, between the bells, the stock dipped to around $220, rallied to $513, and dipped all the way back down to around $250.
That's how extended-hours trading works on a conceptual level, but how do you actually place trades for the pre- and post-market sessions?
Let's look at Schwab.com to see exactly how to place an extended-hours trade. Keep in mind, mutual funds, bonds, and most options do not trade in extended hours.
To start, I'll use Apple for an example; its ticker symbol is AAPL. I'll enter that into Search at the top of the page, hit enter, and select the name. Let's go ahead and click the Buy button. It'll automatically load to SnapTicket®. Many brokerages only allow limit orders in the extended hours. According to the SEC, this is a way to "protect investors from unexpectedly bad prices."
Now, this next part is really important if I want my trade entered for one of the extended-hours sessions. I'll select the Timing drop-down. You can see there are several choices here beyond the usual day and good-till-canceled, or GTC, orders. Let's focus on the ones related to extended-hours trading.
The first is Day + extended hours. Equity orders placed during regular hours using this order will carry over into that day's extended hours session. However, Stop orders aren't eligible for execution during an extended hours session.
Next is the GTC + extended hours. These orders are good for up to 180 calendar days at Schwab. Like day plus extended orders, GTC plus extended orders are only available for limit orders and are active during all equity trading sessions.
Extended-hours a.m. orders are good for the morning extended session only, which runs daily from 7:00 a.m. to 9:25 a.m. ET.
Extended-hours p.m. orders are good for the evening extended session only, which runs daily from 4:05 p.m. to 8:00 p.m. ET.
Once my order is set up, I'll select Review, and then I'd select Place Order when I was ready to make the trade.
Extended hours trading varies depending on which Schwab platform you're using. Investors interested in overnight trading with access to more securities will want to check out the thinkorswim® platform.
While we've seen that there are some benefits to trading after-hours or in the wee hours of the morning, don't forget the risks because it's not for the faint of heart.
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