Table of contents
- Introduction
- US Extended Hours
- Benefits of US Extended Hours
- Summary
Introduction
With globalisation and technological advancements, stock trading has become highly accessible worldwide. However, the regular US trading hours, fixed from 10.30pm to 5.00am SGT (9.30pm to 4.00am SGT during Daylight Savings Time), can be inconvenient for many investors, especially in the APAC region, which operates in a different time zone. This inconvenience led to the implementation of extended trading hours, both before and after the regular market sessions, in the 1990s.
US Extended Hours Trading
The key difference between US extended hours and regular trading hours lies in the manner of execution. During regular trading hours, trades must adhere to the National Best Bid and Offer (NBBO), ensuring the best execution practice. In contrast, during extended hours, trades occur primarily on various Electronic Communication Networks (ECNs), which are not bound by NBBO regulations. This can result in price variations across different ECNs, as they operate independently. Although trades during extended hours must still be reported to FINRA, ECNs are typically isolated, leading to potential discrepancies in prices as orders are routed to separate networks.
Illustration of ECNs Network
Benefits of US Extended Hours
Why are US extended hours so favourable among investors? Significant price movements often occur during these hours due to news releases and earnings reports. Popular stocks like NFLX, TSLA, and NVDA have experienced overnight jumps and falls of 10-20% following their earnings reports, leading to substantial gains for those with long or short positions.
Source: Bloomberg 22 July 2024
As highlighted in green on the Bloomberg snapshot, the exponential gaps represent breakouts. These breakouts typically occur during extended trading hours due to various economic factors or news reports that drive market movement.
Trading during extended hours allows investors to capitalise on momentum as stocks may continue to rise or fall during regular market hours. This underscores the importance of extended trading hours, enabling investors to enter positions based on timely information or to capture ongoing momentum.
Investors should note that high volumes of trading usually occur from market close until 6.30am SGT (5.30am SGT during Daylight Saving Time), as most earnings and news are reported after the regular market close at 5.00am SGT (4.00am SGT during Daylight Saving Time).
However, it’s important to be well-informed while participating in extended hours trading. To learn more about extended hours trading and make the most of your investment opportunities, check out our past market journal.
Summary
In conclusion, trading during extended hours can be particularly advantageous for investors located in different time zones from the US market hours. It enables long-term investment opportunities without disrupting one’s daily schedule, especially useful for those who have work commitments the next day. However, it’s essential to be aware of the potential downsides, such as lower liquidity and higher volatility.
Excited about the potential of trading during extended hours? Don’t miss out on the opportunity to start trading on our platform! Log into POEMS now to explore the benefits of extended hours trading and take your investment journey to the next level.
For more details on extended hours trading with POEMS, visit our website or connect with our dedicated Night Desk representatives at globalnight@phillip.com.sg or (+65) 6531 1225. Start investing smarter with POEMS today!
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