How do stock prices move after hours? Stocks move after hours because many brokerages allow traders to place trades outside of normal market hours. Every trade has the potential to move the price, regardless of when the trade takes place.
Why Are Stock Prices More Volatile in After-Hours Trading? The number of participants in after-hours trading is a fraction of those during regular market hours. Fewer participants means lower trading volumes and liquidity, and hence, wider bid-ask spreads and more volatility.
Trading After Hours
The same things that move stock prices during regular hours also move them after hours – supply and demand. If big news about a company breaks, that will affect the price in after-hours trading, and the price will rise or fall depending on the news.
But after-hours trading both enhances the standard risks of the market and introduces additional risks. The major risks of after-hours trading are: Low liquidity. Trade volume is much lower after business hours, which means you won't be able to buy and sell as easily, and prices are more volatile.
Who Can Trade After Hours? Individual retail investors and institutional investors alike can trade after hours. There aren't any restrictions on who can trade after hours, although retail investors generally weren't able to trade after hours until mid-1999.
Traditionally, the markets are open from 9:30 AM to 4 PM ET during normal business days. With extended-hours trading, you'll be able to trade during pre-market and after-hours sessions. Pre-market will be available 2.5 hours earlier, starting at 7 AM ET. After-hours trading continues for 4 more hours, until 8 PM ET.
The upshot: Like early market trading, the hour before market close from 3 p.m. to 4 p.m. ET is one of the best times to buy and sell stock because of significant price movements, higher trading volume and inexperienced investors placing last-minute trades.
Earnings Releases
During this time, company earnings are generally released before the market opens and after the close, often causing substantial price moves in the underlying stocks outside regular trading hours.
If there are more people who want to buy a stock than people who are willing to sell the stock–there are more buyers than sellers–the stock's price will rise due to increased demand. On the other hand, if more people are selling a given stock than are buying it, its price will decrease.
The term Monday effect refers to a financial theory that suggests that stock market returns will follow the prevailing trends from the previous Friday when it opens the following Monday.
Because relatively few people actually trade after the market closes, orders tend to build up overnight, and in a rising market, that will produce an upward price surge when the market opens. But during extended declines, overnight sell orders may cause prices to plummet when the market opens.
Gaps occur because of underlying fundamental or technical factors. For example, if a company's earnings are much higher than expected, the company's stock may gap up the next day. This means the stock price opened higher than it closed the day before, thereby leaving a gap.
What Is the Highest Stock Price Ever? Berkshire Hathaway holds the title for having the highest stock price—$445,000.
Winner: Amazon. One day after Meta's staggering loss, another tech giant set a new record for single-day gains. On January 4, 2022, Amazon (AMZN)'s market capitalization rose by $190 billion in a single day, beating out Apple's record of $179 billion a week earlier.
After-hours trading does not necessarily affect a stock's opening price at the next regular trading session. In fact, the opening price can look dramatically different from the prices seen in the electronic market.
If the price is lower than the closing price from yesterday, you know the stock market is probably going to open lower. If the price is higher than the closing price from yesterday, you know the stock market is probably going to open higher.
By this we mean that share prices change because of supply and demand. If more people want to buy a stock (demand) than sell it (supply), then the price moves up. Conversely, if more people wanted to sell a stock than buy it, there would be greater supply than demand, and the price would fall.
Best Times of Day to Buy or Sell Stocks
First thing in the morning, market volumes and prices can go wild. The opening hours are when the market factors in all of the events and news releases since the previous closing bell, which contributes to price volatility.
Stock turnover is generally lower and price movements less pronounced on the last trading day of week. Companies with bad news to report often take advantage of this slowdown by making their announcements on Fridays.
Stock prices fall on Mondays, following a rise on the previous trading day (usually Friday). This timing translates to a recurrent low or negative average return from Friday to Monday in the stock market.
If you sell a stock security too soon after purchasing it, you may commit a trading violation. The U.S. Securities and Exchange Commission (SEC) calls this violation “free-riding.” Formerly, this time frame was three days after purchasing a security, but in 2017, the SEC shortened this period to two days.
YES–Robinhood is absolutely safe. Your funds on Robinhood are protected up to $500,000 for securities and $250,000 for cash claims because they are a member of the SIPC. Furthermore, Robinhood is a securities brokerage and as such, securities brokerages are regulated by the Securities and Exchange Commission (SEC).
Robinhood is an online discount brokerage that offers a commission-free investing and trading platform. The company gets the vast majority of revenue from transaction-based revenues, including payments for order flow.