As an investor, it's helpful to know that most stock exchanges in North America are typically open for 5-7 hours on weekdays. The Toronto Stock Exchange (TSX), New York Stock Exchange (NYSE), and Nasdaq (NASDAQ) all share the same regular trading hours – between 9:30 a.m. and 4 p.m. ET, Monday to Friday, except stock market holidays.
The economy, however, is not bound by these hours and important market shifts can occur at any time. This factor, as well as advancements in electronic trading have encouraged markets to enable trading beyond regular hours.
Trading outside regular hours is called pre-market and after-hours trading, with pre-market trading hours usually taking place between 8 a.m. and 9:30 a.m. ET on weekdays and after-hours trading starting at 4 p.m. and running as late as 8 p.m. ET on weekdays as well.
The relative shortness of regular trading hours can lead to more efficient markets and less volatility – shorter trading periods give investors more time to analyze business news and information before markets open, which can help prevent rushed trading decisions. However, as trading activity is compressed into a smaller period of time, it can lead to increased liquidity and smaller spreads.
Pre-market trading and after-hours trading generally have less volume – and depending on where you are, they may have different trading rules. Besides low volume, there is also limited liquidity during extended hours, which can lead to increased volatility, larger spreads, and greater price uncertainty. Plus, earning reports are typically announced after regular trading hours which can lead to major price swings.
Accessing extended hours market data
If you have a brokerage account, you can use its information services to access detailed after-hours market trading data. This is usually provided for free.
For example, with TD Direct Investing you can enter pre-market or after-hour orders online using WebBroker or Advanced Dashboard for eligible securities.
If you don't have a brokerage account, there are a number of sites that offer free access to pre-market and after-hours data.
Why investors engage in pre-market and after-hours trading
Extended trading hours can offer a number of benefits to investors, as they can use this time to quickly respond to business news or changes in the market. For example, if a company releases a surprisingly favourable earnings report after hours, it could create a demand for shares and a subsequent bump in the company's stock price.
Another scenario could be the influence of overseas markets. Let's say a company with close ties to a market in Asia experiences fluctuations in price - investors trading after-hours may be able to act quickly on this information.
While extended hour trading may give you an advantage, it is important to understand the risks as well.