Hi everyone, here is the third post from the series "Education for new investors". Again, I will be sharing my knowledge on topics surrounding investing and readers do not require prior financial background to understand the posts. This one is about "Extended Trading Hours".
❓ What are "Extended Trading Hours" ?❓
Usually, trading markets are open from 9.30am to 4pm, commonly called "Trading Hours". During the trading hours, most of your favourite company's news will be published.
The Extended Trading Hours are the time before the opening and after the closing of the Trading Hours, commonly called "pre-market" and "post-market". During the pre-market hours and post-market hours, the earnings of your favourite companies are released.
Earnings are never released during the trading hours.
For example, in the US, the trading hours start at 9.30am, but some investors are able to trade few hours before the opening, during the pre-market session. Also some investor have the possibility to trade for a few hours after 4pm, during the post-market session.
🤷♂️ Can I trade during the Extended Trading Hours ? 🤷♂️
It is mainly institutional investors who are able to trade during theses sessions. Additionally, some brokers allow it, but I would not recommend it because we are investors, we do not take quick decisions, we focus on the long term and make slow and rational decisions. Also, investors do not need extended trading hours to be successful. If the price of XYZ company's share is at $20 during trading hours, and being traded at $20.5 or $19.5 during pre-market hours or post-market hours, as investor it does not matter to me.
🤷♂️ Is there any advantage for me as an investor ? 🤷♂️
There are a few advantages of not being able to trade during these hours.
The first one is that we are protected from taking quick decisions that we will regret later. The second advantage, which I find the most interesting, is that institutional investors (managing large amounts of capital), can offer us volatility during these extended trading hours even though we are not given the possibility to trade.
If your favourite company XYZ releases their earnings during the post market session and institutional investors find their earnings not meeting their expectations, the price of the share might drop. Following the drop of the price, as investor we might find it very attractive to buy even more shares of our favourite XYZ company.
On the other hand, if the same company releases excellent results, institutional investors will invest even more, which means that the value of our share of XYZ company will rise. 💸💸
These are the top take-away points to know about Trading Hours / Extended Trading Hours which will benefit new investors.
If you liked this post, please stay tuned for more posts within the series. 👍🏻👍🏻