If you’re new to trading stocks, you may be wondering when the best time of day is to trade. Typically, the best time to trade is in the first couple of hours after the market opens. This is because the latest news hasn’t yet been factored into price movements.
After-hours trading is also an option. However, it comes with a few risks.
The NYSE and NASDAQ
The NYSE and Nasdaq are the two main stock markets in the United States. They are both open from 9:30 am to 4 pm ET on Monday through Friday. However, they are closed on weekends and on certain holidays.
Both exchanges offer pre-market and after-hours trading, but it’s not the same as the regular market hours. During these sessions, orders are executed using electronic communication networks that match buyers and sellers automatically. This can cause a wider spread, as the market is less liquid and prices may fluctuate more than normal.
The NYSE is owned by Intercontinental Exchange, which also owns the NASDAQ. While NASDAQ is based in New York City, it doesn’t have a physical location on Wall Street like the NYSE does. There is no official opening bell to signal the start of trading, but a virtual bell rings when the market opens and closing bells are rung when companies make significant announcements or important events happen.
Holidays
Traders should be aware that the stock market closes on certain holidays. These days are known as market holidays and they are the dates on which the NYSE and Nasdaq are closed for business. They can include holidays such as Memorial Day, Veterans Day and Juneteenth. Those who trade on foreign exchanges may also observe different holiday schedules due to local culture and religious practices.
Trading volume tends to be lower immediately before and after a holiday, so investors should take that into account when making trades. Additionally, traders should be aware that if a holiday falls on a weekend, the markets will close early on Friday and will remain closed for the rest of the weekend.
This can cause a significant impact on the market, as many traders will sell their stocks before going away for the holiday. This is a traditional practice that is referred to as “selling in May and going away for St Leger Day.” This is a reference to the famous horse race that takes place in September in England.
Pre-market trading
Traders may want to watch premarket trading trends, but they should keep in mind that these prices are often volatile and don’t necessarily reflect the market’s behavior during regular session hours. In addition, limited liquidity can cause prices to rise and fall more quickly than usual.
TD Direct Investing and TD Easy TradeTM both offer premarket and after-hours trading for self-directed investors. However, this type of trading is not available for all investments. For example, mutual funds and some types of over-the-counter (OTC) trading are not available during extended hours.
Premarket trading takes place before the stock market opens at 9:30 am. It involves the purchase and sale of securities over Electronic Communication Networks (ECNs) that match buy and sell orders. It is characterized by low trading volumes and thin liquidity, so large bid-ask spreads are common. However, there are advantages to trading in the pre-market, especially for investors who are looking to react quickly to news events.
After-hours trading
Traders can buy and sell shares of publicly traded companies in extended trading hours (after-hours or pre-market) through electronic communication networks. These ECNs match buy and sell orders based on price requirements. However, the volume of shares available for trading is lower after hours, and prices can be more volatile.
Additionally, not all order types are available in after-hours trading. Only limit orders are accepted. Market and stop-limit orders cannot be placed in after-hours trading. Additionally, index values are not calculated or disseminated in after-hours trading, which can make it difficult to evaluate a stock’s performance.
Despite these drawbacks, after-hours trading can be beneficial for investors who want to react quickly to news or events that occur outside of regular market hours. However, it’s important to understand the impact of extended trading hours on the stock market’s opening price. For example, trades completed in after-hours trading can affect the price at which a stock opens on the next day.
