Extended Trading
Candlefocus EditorThe U.S. stock market typically closes at 4:00 p.m. EST, however "extended trading" takes place after the exchange closes. This type of trading requires an electronic connection and the ability to access a trading system. Because the trading occurs outside normal market hours, the prices aren’t always the same as during the regular trading hours.
Extended trading offers both opportunities and risks to investors. On the one hand, extended trading can provide investors with the opportunity to gain exposure to securities that may not be available during regular trading hours, as well as react to news or other events that occur after the exchange closes. On the other hand, extended trading can be much more volatile than normal trading hours and require investors to pay more close attention to their investments.
Due to the heightened risks associated with extended trading, some brokers or exchanges may require additional approval, such as higher account equity or approval to day trade, and may further limit the types of orders that can be placed in extended hours and the order allotment. In addition, most trading platforms will have a different fee structure for transactions placed in extended trading, with higher commission and/or wider spreads.
Ultimately, investors need to consider their own risk tolerance and trading strategy before determining whether extended trading is suitable for them. While extended trading may present a good opportunity for the savvy investor, it can also lead to increased levels of risk, and may not be suitable for all situations.