Extended hours trading

Extended hours trading covers buying and selling stocks outside the regular trading session, both before the market opens in the pre-market session and after it closes in after-hours trading. US exchanges normally run from 9:30 a.m. to 4:00 p.m. Eastern time, but many brokers let clients place orders in the hours surrounding that window, typically starting as early as 4:00 a.m. and running as late as 8:00 p.m., though the exact hours vary by broker.

Trading during these sessions happens through electronic communication networks and other alternative trading systems rather than the primary exchanges, since those exchanges are closed. That has real consequences for how orders behave. Volume is much lower than during regular hours, so bid-ask spreads tend to be wider and prices can move sharply on relatively small orders. Many brokers only accept limit orders during extended hours specifically because a market order in thin trading could execute at a far worse price than expected.

Extended hours trading matters most around earnings reports and other major news, since companies often release this information before the market opens or after it closes, and a stock can move significantly in the pre-market or after-hours session well before most investors are able to react during regular trading. An investor watching a stock's after-hours move needs to remember that the price reflects a much thinner, less representative pool of trading than the official closing price set by the closing auction.