Can You Buy Shares After the Market Closes?

The US stock market typically operates during standard hours, generally from 9:30 a.m. to 4:00 p.m. Eastern Time (ET) on weekdays. However, market activity does not cease when the closing bell rings. Investors can engage in trading outside of these conventional times through extended trading hours, allowing them to react to developments during off-market periods. This article explains how extended trading functions and its unique environment.

Understanding Extended Trading Hours

Extended trading hours refer to periods when securities can be bought and sold outside the standard 9:30 a.m. to 4:00 p.m. ET timeframe. These sessions are primarily divided into “pre-market” and “after-hours” trading. Pre-market trading typically occurs from 4:00 a.m. to 9:30 a.m. ET, while after-hours trading generally runs from 4:00 p.m. to 8:00 p.m. ET. Retail investors can participate in these sessions.

The emergence of Electronic Communication Networks (ECNs) played an important role in making extended hours trading accessible to individual investors. ECNs are automated systems that match buy and sell orders electronically, bypassing traditional exchanges during these periods. This allows for broader participation in trading activities, enabling investors to react to news releases or other events occurring when the main market is closed.

The operational framework of extended trading sessions differs from regular market hours. During standard hours, major exchanges like the New York Stock Exchange (NYSE) and Nasdaq handle the bulk of trading. In contrast, extended hours trading is predominantly facilitated by ECNs. This fundamental difference in infrastructure contributes to the distinct characteristics of the extended trading environment, which include variations in liquidity and volatility compared to regular hours.

Executing Trades During Extended Hours

To place a trade during extended hours, a retail investor needs a brokerage account that supports this functionality. Most major online brokerage platforms offer access to pre-market and after-hours trading, often requiring specific settings or permissions. Brokerages provide instructions on how to enable this feature.

Unlike regular trading hours where various order types are accepted, extended hours trading generally restricts investors to using limit orders. A limit order specifies the maximum price an investor is willing to pay when buying or the minimum price they are willing to accept when selling. This is a safeguard against unpredictable price swings in a less liquid environment.

When placing an order, investors must explicitly indicate it is for extended hours. This is often done by selecting a specific time-in-force instruction, such as “Day + Extended Hours” or “Good ‘Til Canceled (GTC) extended hours.” A “Day + Extended Hours” order is active for the current extended session and potentially rolls into the regular session if not filled. A “GTC extended hours” order remains active across multiple extended sessions until filled or canceled. The process involves selecting the stock, quantity, limit order type, limit price, and the appropriate extended hours time-in-force option before submission.

Navigating the Extended Trading Environment

One significant feature of extended trading is lower liquidity, meaning fewer buyers and sellers participate compared to regular market hours. This reduced activity can make it more challenging to execute trades, as there is no guarantee an order will be filled. Orders may be partially executed, or not at all, due to limited matching orders.

Another characteristic is higher volatility, where stock prices can fluctuate more dramatically over short periods. This heightened price movement results from the lower trading volume, as fewer trades can lead to larger price swings. The prices observed during extended hours may not necessarily reflect the prices at the close of regular trading or the opening prices of the next day.

Extended hours often feature wider bid-ask spreads, which is the difference between the highest price a buyer is willing to pay (bid) and the lowest price a seller is willing to accept (ask). Wider spreads effectively increase the cost of a transaction, as investors may buy at a higher price or sell at a lower price than they would during regular hours. This is a direct consequence of the lower liquidity and can impact the overall profitability of a trade.

News announcements frequently occur outside regular market hours, including earnings reports or significant economic data. These announcements can trigger rapid and substantial price movements during extended sessions as traders react immediately to new information. Because of these market dynamics, orders placed during extended hours might not be filled at the expected price, making limit orders essential to control the execution price.