Just as you are able to, doesn’t mean you should; this is what I think of after-hours trading.
In this post, I am going to discuss the seven reasons I do not trade during the after hours.
Before we dive into the seven reasons, let me before all else ground you on what is after-hours trading.
How Does After-Hours Trading Work?
After-hours trading is the trading of shares after the regular session has ended at 4 pm and occurs medially 4:00 pm and 8:00 pm on the U.S. exchanges.
This activity was originally open to the wealthy and large institutions. However, with the advent of the Internet, and Electronic Communications Networks (ECNs), the everyday trader now can post after-hours trades through their broker.
Most retail traders believe that some pending news or earnings release set for the next day will generate a move so that they will enter positions as well. The sad thing is, this is often a form of gambling and not truly investing.
If you are a trader contemplating after-hours trading, here are the five reasons I stay away.
5 Reasons I Avoid After Hours Trading
1. Huge Bid/Ask Spreads
Large Bid-Ask Spreads
After-hours that the bidask spreads for shares available drastically. A 50 share, as an instance, will get a spread of 50.18 by $50.46. Which can you do in this circumstance?
Can you really purchase the share at $50.46? Well, needless to say, you certainly are able to, however, you know a few impending news, or possess a lengthy time horizon to that trade, since you might possibly be down within a 1 / 2 a percentage the moment you implement the trade. Enormous bid/ask spreads really are a breeding ground for annoyance. If you’re a trader that locates often becoming emotional about every trade you’re in, large spreads aren’t for you personally.
The other crucial point of concern to me personally is that in afterhours trading you’ve got to set orders. This usually means that you may ‘t just hit sell at store and obtain out of our position. This means you may have to lower your asking amount to attract buyersand guess what happens?
That’s right; potential buyers lower their bids.
What I’m attempting to illustrate here is that getting out of a position at your desired amount becomes exponentially more difficult in the after hours.
2. Light Volume
Boring After Hours Trading
So we’ve discussed the large bid/ask spreads and light volume trading. What do you think these two factors lead to? Your before all else guess would be wild amount moves.
Well, it’s the exact opposite. The big moves don’t can be found until I’m. You might obtain just a tiny soda out of 4 to 4:30, however it quickly disappears until 8 pm.
4. I’m Tired by 4 pm
The normal trading session is from 9:30 am to 4 pm.However, my afternoon with all the store starts as soon as 8 am together with me tracking premarket movers to judge shares in drama.
I just trade the before all else hourbut then means it’s a great 2 and half an hour of emphasizing graphs. Now, you most likely are calling me a very huge crybaby also to obtain over myself to needing to work less than just three hours.
Remember, should I create a single mistake I could lose big income. Therefore when I state I am focusing, then I mean .
I will ‘t imagine going back into the store at 4 pm and then sitting through possibly another four-hour session until 8 pm. As we mentioned earlier, there is no guarantee you are going to be able to jump in and out of the trade quickly.
5. Charts Are Not Clean
Four More Hours of Charts
As you can see in the above chart, right after 4 pm the liquidity for high movers may still be in play. This is a one minute chart of GLBS that had a strong move, but imagine sitting there from 6 pm to 8 pm watching those small candles print.
This choppy low volume action continues at 4 am when the premarket opens and doesn’t finish till 8 am.
Then something happens approximately 6 pm at which the amount dries up. Then you obtain these minimal volume candles of 100 stocks also it’s only extremely hard to make sense of this all.
How are you likely to locate clear graph layouts to trade at any amount of accuracy? The trick to daytrading is knowing your own routines and appraising your risks centered on clear pivot indicators or points in your own graph.
Due to this light volume and too little overall attention after-hours, anybody outthere using 50k or longer could completely annihilate a blueprint you are looking forward to hours to grow.
How Can Theforexassassin Help?
In Theforexassassin we display both the premarket and afterhours data. You may then unleash tens of 1000s of graphs to learn whether you can find any routines that provide you an advantage.
To find out more about afterhours trading, then have a look at this study by the SEC that covers ECNs and hours trading.