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Money never sleeps. Although the stock market has defined hours of operation, there is much to learn and be aware of regarding after hours activities. Some of the most important lessons can be learned outside the official timeline of the often-volatile trading floor.
Using the pre- and post-market times to analyze trends and attempt to predict market outlook can make a huge impact on the success of your choices during peak times.
Economic Indicators.
Pre-market refers to the time before the opening bell rings when traders and investors gauge the market outlook. This is a valuable time because it will give you the opportunity to review the findings from any after-hours activity and apply them to the information that is released typically one hour before the market opens. These economic indicators are the key components related to price action. This piece of data can help analysts make decisions about current or future investment possibilities.
In some cases, economic indicators can also signal changes in the overall health of the economy. Unemployment figures and oil prices are example of economic indicators that can change frequently and impact the stock market. Current events can also impact massive moves within the market. Often reported during evenings and weekends, current and major news events of geopolitical nature can take the market by surprise at any time of the day. Having access to the market before it opens will allow you to position yourself in a more favorable spot to maritage risk in case of unforeseeable events.
Earnings Releases.
It is common practice for corporations to announce quarterly earnings results either after the market has closed, or just before it opens. These announcements can heavily influence trading activity in either direction. For example, the announcement of an acquisition may have positive consequences for traders while a bankruptcy will naturally have an adverse effect. A company’s stock price and health are related to these earnings releases, so it is essential as trader or investor to be knowledgeable about them. You can take advantage of this off hours reporting by positioning yourself in the off hours to be able to get into or out of certain entities as soon as the market opens.
Assess Risks.
Technology has made it increasingly popular to engage in afterhours trading activity. Digital trading platforms have made it easy for investors and traders to have access to opportunities on a 24-hour clock. An important aspect of the pre- and post-market trading hours is understanding that there is a significantly higher level of risk involved when trading during these times.
Understanding how trading during these time frames can be both advantageous and costly will help you learn how to take advantage of them. Before the market opens there is less volume so you will not be able to move in and out of positions quickly. This same low volume after hours can impact aspects like difficulty getting your order executed at a suitable price. While there is a convenience factor with not being chained to the on hours of the market, ultimately the higher level of volatility may not be worth it.
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