Complete Guide to After-Hours Trading in the US Stock Market: Opportunities and Pitfalls of 24-Hour Trading

Many investors have heard the saying: “After-hours trading in the US stock market is the real battleground,” and “Electronic trading runs 24 hours a day, making money nonstop.” But when you open your trading software and face the dizzying array of time conversions and quote fluctuations, you often feel confused. Today, we will delve into the actual situation of after-hours trading in the US stock market.

First, Understand: What Are Electronic Trading and After-Hours Trading?

Electronic trading (also known as night trading or after-hours trading) is a trading method that breaks through the regular trading hours. The regular trading hours for US stocks are from 9:30 AM to 4:00 PM Eastern Time. Outside this window, electronic trading extends the possibility for investors to trade.

Participants in US after-hours trading are mainly institutional investors and traders with real-time information. They position themselves in advance based on news after the close or expectations for the next day. US after-hours trading includes stocks listed on NASDAQ, NYSE, and some exchange-traded funds (ETFs).

In contrast, futures electronic trading operates 24/7. From energy futures and precious metals to various commodity futures, global investors can enter the market at any time to respond to market changes. Since Taiwan Futures Exchange launched night trading in 2017, it has also provided extended trading hours for products like Taiwan Index Futures.

US After-Hours Trading Time Chart: Cross-Time Zone Trading Windows

US after-hours trading (electronic trading) occurs from 4 hours after the US stock market closes, i.e., from 4:00 PM to 8:00 PM Eastern Time. Due to daylight saving time and standard time in the US, the corresponding Taiwan time varies.

The US futures market is a globally linked market operating almost 24 hours. For example, stock index futures trading is divided into manual trading and electronic trading:

Note: Electronic trading on Monday starts 1.5 hours later.

Compared to this, Taiwan Futures Exchange’s trading hours are more compact. For index futures, after-hours trading (night session) runs from 3:00 PM to 5:00 AM the next day; currency futures are traded from 5:25 PM to 5:00 AM the next day.

Where to Check US After-Hours Quotes? Practical Inquiry Guide

Investors can view US after-hours quotes through multiple channels:

Stock after-hours quotes: Log into NASDAQ’s official after-hours trading page to see real-time quotes for individual stocks (e.g., Tesla). Major brokerage platforms and professional analysis software also provide this information.

Futures electronic quotes: CME’s official website or platforms like TradingView publish real-time futures market quotes. These platforms often offer advanced tools such as intraday charts and technical indicators, facilitating analysis.

The Real Risks of US After-Hours Trading: Four Hidden Traps Not to Ignore

1. Price quote system discrepancies lead to hidden costs

Different exchanges or trading platforms may show divergent electronic quotes. Some institutions only allow investors to view quotes within their own trading systems. Even if investors obtain quotes from other platforms, they cannot execute trades based on them. This information asymmetry can indirectly increase trading costs.

2. Abnormal price volatility

After-hours trading faces overnight risk. If significant news or unexpected events occur after hours, stock prices may fluctuate wildly at the next open, causing investors to suffer unexpected losses.

3. Significant widening of bid-ask spreads

Reduced trading volume directly leads to decreased liquidity. The bid-ask spread widens noticeably, making it difficult for investors to get execution prices similar to intraday trading. Some illiquid stocks may even have no trades for extended periods.

4. Limited trading methods

Most US after-hours markets only accept limit orders. Investors must set their own execution prices, take-profit, or stop-loss points. If the market price moves far from the set price, the system will automatically cancel the order, preventing automatic execution.

US After-Hours Trading: Opportunities and Risks

Advantages

• Extended Time Flexibility: Breaks through regular trading hours, allowing real-time response to market information pre- and post-market, enabling quick reactions to overnight news.

• Increased Market Participation: Global investors can participate simultaneously without geographical restrictions, expanding trading volume, and improving market fairness, transparency, and efficiency.

• Pre-positioning Strategies: Investors can build positions in potential stocks based on overnight news and market expectations or capitalize on after-hours volatility for short-term trading.

Risks

• Dominance of Institutional Investors: After-hours is mainly active with large institutions possessing abundant resources and real-time information, leaving retail investors at a disadvantage in both information and capital.

• Liquidity Drying Up: Compared to intraday trading, after-hours trading volume shrinks significantly. Some stocks may have very few traders, making it hard to find ideal prices, or even be completely illiquid during the entire session.

• System Auto-Matching Risks: US electronic trading is fully controlled by automated systems. System failures or delays can severely impact trade execution, leading to unexpected losses.

Summary: Rationally View the Reality of After-Hours Trading

US after-hours trading extends investors’ trading time and space options, but this does not mean encouraging frequent trading. Investors should fully understand its advantages (time flexibility, increased participation, pre-positioning opportunities) and disadvantages (large price swings, low liquidity, institutional competition, system risks). Before engaging in after-hours trading, be sure to thoroughly understand the platform’s rules and details, and make rational decisions based on complete information.