Pre-market and after-hours trading
Some stocks trade before the market opens and after it closes. Here is how extended-hours trading works and why prices can behave differently.
The main stock market session in the US and Canada runs from 9:30 a.m. to 4:00 p.m. Eastern time on weekdays. But some trading happens outside those hours. Trading before the open is called pre-market. Trading after the close is called after-hours. Together they are known as extended-hours trading.
Why it exists
A lot of news comes out when the main session is closed.
- Many companies release earnings reports right after the close or before the open.
- Economic data, such as monthly jobs figures, is often released before the open.
- Events overseas happen while North American markets are closed.
Extended hours let investors react to that news without waiting for the next regular session.
How it works
During regular hours, orders flow through the main exchanges. In extended hours, trading mainly happens on electronic systems that match buyers and sellers directly.
Many brokers offer access to extended hours, but the times and rules vary. In the US, pre-market sessions can start in the early morning, and after-hours sessions can run into the evening. Some brokers now offer trading in certain US stocks almost around the clock on weekdays.
Canadian exchanges offer much more limited trading outside the main session. Some Canadian companies are also listed in the US, so their US-listed shares may trade in US extended hours. Check what your broker offers.
Why prices can behave differently
Extended-hours trading has fewer participants. That changes how prices move.
Lower volume. Volume is the number of shares traded. Far fewer shares change hands outside regular hours. With fewer trades, a single large order can move the price more.
Wider spreads. The bid is the highest price a buyer is offering. The ask is the lowest price a seller will accept. The gap between them is the spread. Spreads are often wider in extended hours, so you may pay more to buy or get less when you sell.
Bigger swings. With less trading and fresh news, prices can jump or drop sharply. See what volatility means.
Prices may not hold. A big move after hours can shrink, grow or reverse when the regular session opens and more traders take part.
Order rules
Many brokers only accept limit orders in extended hours. A limit order lets you set the highest price you will pay or the lowest price you will accept. This offers some protection when prices are jumping around.
Orders placed for the regular session may not carry into extended hours, and the other way around. Some brokers require you to mark an order as eligible for extended hours. You can read more in market orders and limit orders.
Reading pre-market moves in the news
News reports often mention how a stock or index futures are doing before the open. Futures are contracts that trade on the expected value of an index and trade for most of the day and night.
Pre-market moves can give a hint of how the regular session may start. They are not a reliable guide to how the day will end.
Gaps at the open
When a stock closes at one price and opens at a very different one, the difference is called a gap. Gaps often follow news released while the market was closed. Extended-hours trading is where the first signs of a gap usually appear.
Things to keep in mind
- Not every broker offers extended hours, and not every stock is available.
- Quotes may be less reliable, and fewer shares may be available at the shown price.
- Some news, such as an earnings release, can cause large moves in seconds.
- The closing price reported in the news is usually from the regular session, not after-hours trading.
The short version
- Pre-market trading happens before the 9:30 a.m. Eastern open; after-hours trading happens after the 4:00 p.m. close.
- It lets investors react to news released outside regular hours.
- Lower volume and wider spreads can lead to bigger price swings.
- Many brokers allow only limit orders in extended hours.
- Canadian exchanges offer far less extended-hours trading than US markets.
This is general information, not investment advice.
Updated