Maximize Investment Opportunities: Understanding Extended Trading

Explore the possibilities and risks of extended trading, beyond ordinary market hours, to react swiftly to market-moving events. Learn about the nuances, advantages, and limitations of pre-market and after-hours trading.

What Is Extended Trading?

Extended trading is conducted by electronic networks either before or after the regular trading hours of the listing exchange. The U.S. stock exchanges are open from 9:30 a.m. to 4:00 p.m. EST.

Pre-market stock trading in the United States commonly runs between 4:00 a.m. and 9:30 a.m. EST and after-hours trading occurs from 4:00 p.m. to 8:00 p.m. EST.

Key Takeaways

  • Extended trading occurs on electronic marketplaces outside of the official trading hours of the exchange.
  • U.S. exchanges open at 9:30 a.m. and close at 4:00 p.m. EST. Extended trading occurs outside those hours.
  • Most brokers require traders to enter limit orders during extended trading sessions.

Understanding Extended Trading

Electronic Communication Networks (ECNs) have democratized extended hours for trading outside of regular exchange hours. An ECN is a computerized system that automatically matches buy and sell orders for securities in the market. Extended trading allows investors to act quickly on news and events when the exchange is closed, and these transactions can hint at the open market direction.

Extended trades commonly occur around the beginning or end of regular trading hours. The majority of extended trading happens between 8:00 a.m. and 9:30 a.m. EST. Similarly, investors may trade until 8:00 p.m., but most extended trading occurs before 6:30 p.m.

Most brokers require traders to enter limit orders during extended trading sessions. Some brokers only permit extended trading on Reg NMS securities. Over-the-counter securities, many types of funds, some options, and other markets may not be allowed during extended trading hours. Brokerage firms commonly determine the rules that apply during extended trading. Rules governing the various markets and venues that conduct extended trading vary and may differ significantly from policies during regular trading hours.

Extended Trading Risks

The U.S. Securities and Exchange Commission (SEC) highlights several risks associated with extended trading, including:

  • Limited Liquidity: Extended hours have less trading volume than regular hours, which could make it difficult to execute trades. Some stocks may not trade at all during extended hours.
  • Large Spreads: Less trading volume often translates to wider bid-ask spreads that adversely affect the market price for execution, making it harder to execute orders at favorable prices.
  • Increased Volatility: Less trading volume often creates greater volatility with wider bid-ask spreads. Prices can move drastically in a short amount of time.
  • Uncertain Prices: The price of a stock outside of regular hours may not closely match the price during normal trading hours.
  • Professional Competition: Many extended trading participants are large institutional investors, such as mutual funds, with access to more resources.

Example of Extended Trading in the Stock Market

The following chart shows the extended trading session for ABC Company on a typical day with no company announcements.

The stock closes for trading on the exchange at 4:00 p.m. Before 4:00 p.m., the one-minute chart is active, with price movement every minute of the trading day. There is also volume associated with each one of those one-minute price bars.

After 4:00 p.m., the volume drops off. Some price bars appear as dots because there was a transaction at only one price level during that one minute. There are gaps between the dots because the price may change even though transactions haven’t taken place. Fewer bids and offers may entice or scare an investor into transacting at the new bid or offer.

The last transaction of the evening occurs at 7:55 p.m. in this example. The first transaction is posted at 7:28 a.m. the following morning. The price trades higher than the prior close price but is quickly adjusted as the price falls more than $0.75 in minutes. The price oscillates on the low volume before the official exchange opening occurs and volume escalates.

When Can Investors Benefit from Extended Trading?

The ability to trade during extended hours can allow investors and traders to react instantly to the news which comes out when the exchange is closed. If a company reports poor earnings, the stock will likely drop, and the trader can exit their position sooner rather than wait for the exchange to open.

Where Can Investors Trade During Extended Trading Hours?

Extended trading may take place on alternative trading systems operated by broker-dealers, exchanges, and other trading centers. However, all markets are not available for extended hours of trading.

What Is an Unlinked Market and the Risk During Extended Trading?

Extended hours trading systems are not linked, and the price of a stock displayed on one trading system may not reflect the price of the same stock displayed on another trading system.

The Bottom Line

Extended trading on the exchanges occurs on electronic marketplaces outside of the official trading hours. Stock exchanges in the U.S. trade from 9:30 a.m. to 4:00 p.m. EST and extended trading occurs outside these hours. Risks for investors who trade during extended hours include price volatility and larger quote spreads. Most brokers require traders to enter limit orders during extended trading sessions.

Related Terms: Limit Orders, Electronic Communication Networks, Liquidity, Trading Volume, Broker-Dealers.


  1. U.S. Securities and Exchange Commission. “Investor Bulletin: After-Hours Trading”.
  2. TD. “Pre-market and After-hours Trading”.

Get ready to put your knowledge to the test with this intriguing quiz!

--- primaryColor: 'rgb(121, 82, 179)' secondaryColor: '#DDDDDD' textColor: black shuffle_questions: true --- ## What does the term "Extended Trading" refer to? - [ ] Trading during regular market hours - [x] Trading that occurs outside regular market hours - [ ] Trading limited to significantly small-cap stocks - [ ] Trading that involves only international markets ## When does extended trading typically take place in the US stock market? - [ ] Only during weekends - [x] Pre-market and after-market hours on weekdays - [ ] Only on official holidays - [ ] 24 hours a day ## What are the possible advantages of trading during extended hours? - [x] Potential to react to news events outside of regular hours - [ ] Lower transaction costs - [x] Extended participation in global market activities - [ ] Reduced need for market analysis ## Which of these risks is associated with extended trading? - [ ] Lower volatility - [x] Reduced liquidity compared to regular trading hours - [x] Higher volatility - [ ] Guaranteed lower trading fees ## In extended trading, what regulatory oversight is provided? - [ ] Direct involvement of government agencies - [ ] No regulatory oversight is provided - [x] Rules and regulations set forth by securities exchanges like NYSE and NASDAQ - [ ] Exclusive regulation by the Federal Reserve ## Which participants often use extended trading? - [x] Institutional investors - [ ] Personal financial advisors - [ ] Retail investors only - [x] High-net-worth individuals ## What impact do news releases after regular trading hours have on the extended trading session? - [ ] Usually minimize volatility - [ ] Have no significant impact - [x] Can significantly impact stock prices - [ ] Ensure price stability ## How can extended trading affect bid-ask spreads? - [ ] It generally narrows the spreads - [x] It can widen the spreads due to reduced trading activity - [ ] The spreads remain consistent with regular hours - [ ] Completely eliminates the spreads ## What type of orders are commonly used during extended trading hours? - [ ] Market orders primarily - [x] Limit orders to manage price fluctuations - [ ] "At the close" orders - [ ] Only stop-loss orders ## Which technology enables the possibility of extended trading? - [ ] Only traditional floor trading mechanisms - [x] Electronic communication networks (ECNs) - [ ] Exclusive use of blockchain - [ ] Traditional paper-based trading methods