Trading became a very popular activity in recent years. Several platforms are now available for investors that want to have access to trading stocks, cryptocurrencies, forex and commodities, among other things.
After hours trading is one of the most popular terms that we hear when we trade. But how does the after hours market work? Who is allowed to trade after hours? Is it bad to buy stock after hours? Why do stocks spike after hours?
These are some of the questions we answer in this post.
Disclaimer: the information provided by AltSignals and its writers should not be considered investment advice. We are not financial advisors. The content should be considered for educational purposes only. Never invest more than what you are able to lose. We are not responsible for any decision you make following this guide.
What is Trading?
Trading is an activity in which investors speculate with the price of different assets to make profits. Trading can be used for different purposes too. For example, trading commodities futures could be a way to hedge against possible price fluctuations related to specific assets.
With the expansion of different trading platforms, traders from all over the world get access to many assets. This is why it became so important to understand what trading is and how after hour trading works.
What is After Hours Trading?
After hours trading involves trading securities, stocks or commodities after the market closes. As you know, the market operates during traditional business hours around the world, usually between 9:30 am and 4:00 pm. Nevertheless, this depends on your country of residence.
Once the market closes, buyers and sellers can match their orders using electronic communication networks (ECNs) rather than traditional stock exchanges. In this way, they can still buy or sell stocks once the market closes.
Who is Allowed to Trade After Hours?
Users trading in some platforms is allowed to trade after hours. However, this would depend on the exchanges and the availability of the services they offer. Every single user that trades on an exchange after trade hours enabled should be able to get access to the market.
Take into consideration that volume usually falls after hours. This is because most of the traders end the day as soon as the market closes.
Is it Bad to Buy Stock After Hours?
There are some risks of doing after hours trading. The first thing that we have already mentioned is related to the trading volume. Volumes sharply fall once the market closes, thus, large orders could eventually move the price of an asset.
Additionally, if one session ends positively, many traders that didn’t have the chance of getting access to the stock would buy after hours. Nevertheless, as soon as the market opens the next day, a small correction could take place. The same could happen if you sell a stock after hours.
Why do Stocks Spike After Hours?
Stocks spike after hours because there is a larger interest in the stock. Demand continues to be high, even when the market closes. If a large number of users have access to after-hours trading, they could easily buy stocks after hours and push the price higher.
Due to the same reason, stock prices could fall after hours. Everything depends on supply and demand and how this affects the market.
Types of Markets
There are different markets. There are markets for commodities, currencies, digital assets, stocks and options. Everything depends on the assets you want to trade. Cryptocurrency trading became very popular in recent years due to the large price increase experienced by Bitcoin (BTC) and other digital assets.
Cryptocurrency After Hours Trading
Cryptocurrency after hours trading is simply nonexistent. There is not such a thing as cryptocurrency after hours trading. The cryptocurrency market is opened 24 hours 7 days a week. It never coles as traditional stock markets.
Indeed, if you want to trade cryptocurrencies at 3 am, you can do so without any issues using your local exchange. Trading platforms are opened 24 hours and traders continue to buy and sell virtual currencies even at night.
It is worth taking into consideration that during weekends or not usual trading hours, there could be lower volumes. This could also be a more inefficient way to trade digital assets. There is no best moment to trade digital assets. You can get access to the market as soon as you decide to do so.
