After hours trading lets you buy and sell stocks outside the regular market session. While the NYSE and NASDAQ close at 4:00 PM Eastern, extended hours trading continues until 8:00 PM. In this guide, we will explain how after hours trading works and whether it is right for you.
What is After Hours Trading?
After hours trading, also called extended hours trading or post-market trading, is the period when you can trade stocks after the regular market closes. The after hours session runs from 4:00 PM to 8:00 PM Eastern Time.
Key point: After hours trading uses electronic communication networks (ECNs) to match buyers and sellers instead of traditional exchanges. This means lower liquidity and wider spreads than regular hours.
Extended Hours Trading Sessions
The US stock market has three main trading sessions:
- Pre-market: 4:00 AM to 9:30 AM Eastern
- Regular market: 9:30 AM to 4:00 PM Eastern
- After hours: 4:00 PM to 8:00 PM Eastern
Most retail brokers offer after hours trading from 4:00 PM to 8:00 PM, though some limit it to 6:00 PM or earlier.
Why Trade After Hours?
Traders use after hours sessions for several reasons:
1. React to Earnings Reports
Many companies release earnings after the market closes. After hours trading lets you react immediately instead of waiting until the next morning when the stock may have already moved significantly.
Example
Apple releases earnings at 4:30 PM showing better than expected results. The stock jumps from $150 to $158 in after hours trading. Traders who can access after hours markets can participate in this move.
2. Trade on Breaking News
Major news events do not wait for market hours. Mergers, FDA approvals, and economic announcements can happen anytime. After hours trading gives you access to act on this news.
3. Manage Positions
If you hold a stock that reports bad news after hours, you can exit your position immediately rather than waiting for a potentially worse price at the open.
4. Convenience
For people who work during regular market hours, after hours trading provides a window to manage their portfolios.
Risks of After Hours Trading
After hours trading comes with significant risks that regular session trading does not have:
Lower Liquidity
Fewer traders participate in after hours sessions. This means less volume and wider bid-ask spreads. A stock that trades with a one-cent spread during regular hours might have a twenty-cent spread after hours.
Higher Volatility
Lower liquidity leads to bigger price swings. Small orders can move prices significantly because there are fewer shares available at each price level.
Limit Orders Only
Most brokers require limit orders for after hours trading. Market orders are typically not allowed because the lack of liquidity could result in extremely poor fills.
Price Gaps
The price you see after hours may not be the price at the open. Overnight news or pre-market trading can cause the stock to open at a very different level.
Warning: After hours prices are not always reliable indicators of where a stock will open. Many after hours moves reverse when regular trading begins and more participants enter the market.
After Hours Trading Strategies
Earnings Reaction Trading
This is the most common after hours strategy. Traders position themselves based on earnings results and guidance. The key is to act quickly and have a plan before the numbers come out.
Gap Fade Strategy
Some traders fade extreme after hours moves, betting that the initial reaction is overdone. This works best when the move seems emotional rather than fundamental.
News-Based Trading
When significant news breaks after hours, traders try to capitalize on the initial move before the broader market can react at the open.
Best Practices for After Hours Trading
- Always use limit orders: Never chase prices in thin after hours markets
- Trade smaller size: Reduce position sizes due to increased volatility and wider spreads
- Focus on liquid stocks: Large cap stocks have better after hours liquidity than small caps
- Set realistic expectations: Your limit orders may not fill due to low volume
- Watch the spread: If the bid-ask spread is too wide, wait for regular hours
- Have a plan: Know your entry, exit, and stop loss before placing any trade
Which Brokers Offer After Hours Trading?
Most major online brokers now offer extended hours trading. Hours and fees vary by broker:
- Fidelity: 7:00 AM to 9:28 AM and 4:00 PM to 8:00 PM
- TD Ameritrade: 7:00 AM to 9:28 AM and 4:02 PM to 8:00 PM
- E*TRADE: 7:00 AM to 9:30 AM and 4:00 PM to 8:00 PM
- Robinhood: 7:00 AM to 9:30 AM and 4:00 PM to 8:00 PM
Check with your specific broker for their current extended hours policies and any additional fees.
Should You Trade After Hours?
After hours trading is best suited for experienced traders who understand the risks. Consider these factors:
- Do you have a specific reason to trade outside regular hours?
- Are you comfortable with wider spreads and lower liquidity?
- Can you use limit orders effectively?
- Do you have access to real-time after hours quotes?
Track All Your Trading Sessions
Pro Trader Dashboard tracks your trades across all sessions, including after hours. See which times of day are most profitable for your strategy.
Summary
After hours trading extends your trading day beyond regular market hours. It offers opportunities to react to earnings and news, but comes with increased risks including lower liquidity, wider spreads, and higher volatility. If you decide to trade after hours, use limit orders, trade smaller sizes, and stick to liquid stocks.
Want to learn about the best times to trade? Check out our guide on best hours to trade or explore pre-market trading strategies.