Understanding Market Timings: Pre-Market, Post-Market, and Weekends

You are investing in the stock market either for a long-term or short-term financial objective. To trade, however, you will have to do so within the set specific hours. All stock markets around the world open and close as per their time zones, but the hours remain the same, more or less.

The US market opens at 9:30 am, Canada at 9:30 am, the UK at 8:00 am, Japan at 9:00 am, and India at 9.15 am. These are regular trading hours, but there are many investors who do not know that they can trade even before and after these hours. In this blog, we will understand stock market timings and how pre-market trading works.

What are Stock Market Timings?

Stock market timings refer to the specific hours during which trading occurs on a stock exchange. Every exchange in the world sets its own schedule to ensure the orderly buying and selling of securities. Here are a few examples of stock market timings:

These are regular trading hours during which you can place an order for buying or selling securities. The price of the shares of a company changes only during these hours and from Monday to Friday. Beyond these core hours, the price of the shares neither increases nor decreases.

Besides regular trading hours, there are also pre-market trading and after-hours trading. These hours allow you to trade before the market opens and after it closes officially. However, liquidity is lower, volatility can be higher, and/or only certain order types will be allowed.

What is Pre-Market Trading?

Pre-market trading involves buying and selling of stocks prior to the commencement of the normal market day. It allows investors to make trades using information that is made available during off-normal trading hours, which are periods before the main market opens and after it closes.

The matching of trades electronically is done over a restricted time period prior to the opening of the market. Due to the reduced number of active participants, trades do not occur immediately but at certain prices. Here is how does pre-market trading work:

• Pre-market trading is frequently employed to respond early to:
  • Pre-market earnings announcements
  • Overnight economic or political news in the world
  • Significant company changes or predictions
• This can be an indicator of the way the stock would perform after the normal trading commences.

The key advantage of pre-market trading is that it allows you to respond to news before the majority of traders. It gives you an early understanding of the market direction and time to trade positions before the opening bell. It is, however, also associated with risks such as reduced liquidity and increased price differences between buyers and sellers.

What is After-hours Trading?

Post-market trading or after-hours trading is when the normal market session has ended. It provides investors with the opportunity to trade in case new information is available outside the normal market hours.

Many companies issue reports on earnings, guidance, or significant announcements after the market is closed. Post-market trading enables investors to respond to this news without having to wait till the next trading day. Here is how after-hours trading work:

• Trades during after-hours are matched through Electronic Communication Networks (ECNs) instead of the traditional exchange floor.
• These networks connect buyers and sellers directly, enabling trades outside standard hours.
• Fewer traders are active after hours, which lowers liquidity. Prices can move sharply due to this limited activity.
• Most brokers allow limit orders, which let you set the price you’re willing to buy or sell at.
• After-hours trading typically starts immediately after the regular session ends and can continue for a few hours (for example, 4:00 PM to 8:00 PM ET in the US).

Pre-market vs After-hours Trading

Both after-hours and pre-market are considered to be under the umbrella of extended-hours trading, but they are used in different ways and act differently. Here are the key differences between pre-market vs after-hours:

What are Weekend Stock Market Hours?

The majority of the traditional stock markets worldwide are not open on weekends. This implies that no normal trading is done on Saturdays and Sundays, and this provides a rest to markets between trading weeks. Knowing the hours of the weekend stock market is significant to investors who intend to trade based on news or events around the world.

Trades are conducted on a regular basis to ensure order and liquidity. Weekend closings enable traders, brokers, and institutions to reset and minimize the risk of wild price swings that might result in low participation. Some exceptions are:

• Cryptocurrencies: Cryptocurrencies such as Bitcoin and Ethereum are traded 24/7, even on weekends.
• Some foreign or special markets: There are some foreign markets that have restricted weekend trading or scheduled trading.
• Over-the-counter (OTC) trading: It is possible to trade some OTC stocks or derivatives even during off-hours.

You must understand that the weekend news or events can influence the stock prices when the markets resume. The weekend closures give a natural rest, allowing traders to study positions without pressure.

Tips for Trading During Long Hours

It is tempting to trade beyond the normal market hours, but it is associated with special challenges. Whether it is about pre-market trading or post-market trading, it is always good to follow some tips to make it through long sessions:

• Know Liquidity: Reduced trading participants in extended-hours trading may imply reduced liquidity and increased spreads.
• Volatility: Prices are subject to rapid changes, and you should not overreact to minor changes.
• Using Right Order Types: Limit orders are your friend. They allow you to specify the maximum (buy) or minimum (sell) price, avoiding unwanted fills.
• Avoid Market Order: Avoid market orders as they may cause huge losses because of the sudden changes in prices.
• Track news and events: The long-hour sessions respond to the news of the night, profits, or
• international events. Before trading, it is important to check credible sources to know the possible effects.
• Have a Risk Management Plan: Establish exit and entry points. Prepare yourself for fluctuations in prices and do not trade more than your plan.

Conclusion

As someone just starting in the market, you must understand that trading is not limited to the normal trading hours. Pre-market trading and post-market trading allow you to not only trade seamlessly but also discover the opening price. It also allows you to monitor the stock market trends and mark your entry and exit points.

With the knowledge of the differences, risks, and opportunities of each, you can carefully plan your trades. Markets are always on the move, but knowing when to trade in the stock market and how to use the extended-hours trading, you can always be a step ahead, no matter where you are in the world.