Best Broker for After-Hours Trading
In the realm of late-night trading, we really like TD Ameritrade. The broker’s website trading
ticket includes several time-in-force choices, one of which is for the after-hours period only. Just select “Extended-hours p.m.”
This will allow an order to execute only during the after-hours period, which runs from 2 minutes after the closing bell until 8:00 pm, EST. This is nearly a 4-hour session.
For a handful of ETFs, TD Ameritrade also offers overnight trading. Combined with pre-market
trading and the regular day session, this results in 24/5 trading. Some of the available funds include really popular ticker symbols like QQQ, SPY, and GLD.
Combined with its excellent desktop platform thinkorswim, TD Ameritrade may very well qualify
for the best after-hours trading platform.
Plus, the brokerage house delivers one of the best commission schedules available today. Not only are stock and ETF trades $0, Level II quotes are also free. Partial ACATS transfers also carry zero charge.
Open TD Ameritrade Account
Open TD Ameritrade Account
After-Hours and Pre-Market Trading Details
The U.S. stock market is open for trading during the weekday (minus federal and other market holidays) from 9:30 am until 4:00 pm, Eastern Standard Time. Occasionally, a market day will close early at 1:00 pm. Usually, this happens the day before a major holiday.
But of course, some traders will want to trade outside of these hours. And the stock exchanges oblige them. Known as extended-hours trading, these sessions are perfectly legal and possible.
Extended-hours trading takes place on ECNs (Electronic Communications Networks) and can be divided into pre-market and after-hours sessions. Some brokers offer both periods, while others offer just one. Still other firms offer neither.
Unlike the regular day session, the hours of pre-market and after-hours trading can vary from broker to broker. Take a look at the table above to see the variation.
Not surprisingly, extended-hours trading is not for the faint of heart and should be attempted only by experienced traders.
Risks of Extended-Hours Trading
For the best extended-hours trading experience, it is imperative that you know the hazards involved.
One risk is the lower volume of trading during pre-market and after-hours trading. Because there’s lower volume, bid and ask prices tend to be farther from each other. This means securities are more expensive to buy, and selling prices are lower. This can result in fill prices that are as much as 3% from comparable prices during the day session.
Another risk is that limit orders may not get filled during extended hours because there aren’t as many traders participating during these times. Or a limit order may get partially filled.
Volatility tends to be higher during the late night and early morning sessions as well. Prices can move more quickly, so you need to be prepared for instability.
Orders that are tagged for extended hours only may not be eligible for execution during the day session. Check with your investment firm and verify its exact policy before submitting an order.
Advantages of Extended-Hours Trading
With all the pitfalls associated with extended-hours trading, why would anyone want to try it? Well, there are some notable benefits.
For instance, U.S. companies report earnings before the opening bell or after the closing bell. These earnings reports often cause stock prices to move—significantly sometimes. If you want to get in on these price movements, you have to be in extended hours. The same situation is true with the government’s release of economic data.
Events around the world can impact the stock market, too. These of course can happen outside the regular New York session.
Fees of Extended-Hours Trading
Although most brokerage firms have switched to zero-commission trading, extended-hours trades may in some cases incur additional fees. Be sure to look over your firm’s pricing schedule and ask any questions if the plan is not clear.
Disclaimer
INVESTMENT AND INSURANCE PRODUCTS ARE: NOT A DEPOSIT • NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE
Arthur Chachuna is professional personal finance blogger, and the owner of Brokerage-Review.com.
He has been an avid investor for 23 years, and has background in both applied math and programming.
Updated on 1/26/2022.
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