Risks Associated with Trading US Stocks After Market Hours
Investors have been buying US stocks after market pullbacks for nine years. These after market trades will be posted between 4:15 p.m. ET and 3:30 p.m. ET the following day. After Hours trades are traded at a higher volume than regular market hours. After-hours trades are also more liquid. Despite the increased liquidity, there are risks associated with trading after market hours. In this article, we will examine the risks associated with this practice.
Share quotations increase liquidity in the after-hours market
The after-hours market for US stocks offers investors a wide range of opportunities to profit from the sudden changes in the price of a stock. In the US, stock prices are often affected by corporate earnings announcements, which can lead to a sharp increase in market activity.
However, this activity is not as predictable as that of the regular market. Share quotations show the market’s reaction to new information, which makes them less reliable as a reflection of the stock price when the next regular session opens.
The after-hours market for US stocks has been affected by the heightened volatility, with many traders describing price gaps as “air pockets”. This is a result of large-scale stock trades in the so-called block market, where brokers help make major purchases in a company’s stock. These trades can range from hundreds of millions to billions of dollars. Traders are bracing for more volatility, as the market is increasingly volatile and prices are not reflecting the risks associated with a stock.
As fewer investors participate in the after-hours market, liquidity will be lower. Because market makers aren’t involved in the transaction, prices will fluctuate and fewer investors will show up to place orders. As a result, it’s critical that you’ve got enough capital and knowledge to make money in this after-hours market. …