In stock trading, trading big moves during the after-hours can be rough. After-hours trading for stock day trader happens when there are fewer traders participate in buying stocks and the volume is low. During that time the moves can be rapid and extreme.
That produces big profit potential and also big risks at the same time. In some instances, you can’t even determine those risks.
The Definition
The normal stock market trading hours give the official open and close for the day. Most of the daily volume happens between those hours. Yet, trading could also happen outside those hours.
Trading can happen before the market hour is officially open. That pre-market trading is called after-hours trading.
Reasons That Stocks Move After hours
After the closing bell, there may be some traders who are looking to get into or out of positions. That action can last for an hour or more from the official close hour. It usually happens in stocks that have many millions in volume within a day.
These stocks with high volume usually have a regular after-hours activity every day. On the other hand, stocks with lower trading volume may not have after-hours activity at all.
Other reasons that trigger it is news events, like earnings, released after hours. Those news events can significantly affect the stock price.
That immediate price changes, then, make traders directly react (traders usually do not like to wait until the next day). Consequently, that creates a rapid and sizeable share price move. That volatility usually attracts many day traders who are about to enter and exit trades for an immediate profit.
That is the reason why sometimes stock can have a similar move in both after hours and normal sessions. However, just because it is possible to trade during the after-hours does not mean after-hours trading can occur in all stocks.
There is a possibility that the stocks do not have after-hours trades, especially those with little interest.
