I've been seeing stocks go berserk during the after-hour session, and I was wondering how I can take advantage of it. I am asking specifically how the price of stock changes NOT why it changes. Let's say if a company announces its earning after the trading session, how do I place an order to take advantage of the announcement? Inquiring mind needs to know.
how to trade stocks in after-hour session?
- Thread starter IHAVEAQUESTION
- Start date
Miramonti
Lifer
- Aug 26, 2000
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The stocks trade the same way on the same system after hours as they do during the day. All you need is an online brokerage, and choose "include after hours" in your order...there's almost always an option for it these days.
As for earnings announcements and other big afterhours news, the stocks usually halt trading for the news and sometimes do and sometimes don't reopen until the next morning.
As for earnings announcements and other big afterhours news, the stocks usually halt trading for the news and sometimes do and sometimes don't reopen until the next morning.
Stocks halt trading for the earning announcement? Mmm...haven't heard of this.
Anyway, my question is can we really benefit from after-hour trading? Let's say if Intel announces better than expected earning, can I jump into the stock and take advantage of it? Or would it be too late by the time of the announcement?
AnonymouseUser
Diamond Member
- May 14, 2003
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If you are looking for a "buy and hold" stock then you should ignore extended hours trading. Ext. hours are best left for day traders and/or experienced traders.
Miramonti
Lifer
- Aug 26, 2000
- 28,653
- 100
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There is often volatility when the news comes out, and if you have a strategy to make money when the stock moves up or down, during the regular hours or afterhours, go for it. Often things surge initially and its more profitable to be the contrarian than to jump on the bandwagon.
I'll take a shot at this since I used to work in the industry for 10 years.
After hours trading is very risky. Most of the time, large swings you see are made because of some kind of information being released. If you do not know what the information is, you can get burned very easily. For example, a company might release blowout earnings sending the stock up in after hours. However, if you didn't listen to the earning conference call and they mention a slowdown in orders, a product line not doing well, a huge charge, etc. stock could completely whipsaw. This happens all the time. You really need to be on the ball if you decide to do it.
At my old hedge fund we used to buy aftermarket on Instinet quite often but I would say we broke even.
If you are trying to buy/sell stock after hours where nothing is happening, chances are you will not get a good price because the volume tends to be very low.
So unless you really know what you are doing, I would stay away. A lot of the moves are really psychology driven and that could change in an instant.
After hours trading is very risky. Most of the time, large swings you see are made because of some kind of information being released. If you do not know what the information is, you can get burned very easily. For example, a company might release blowout earnings sending the stock up in after hours. However, if you didn't listen to the earning conference call and they mention a slowdown in orders, a product line not doing well, a huge charge, etc. stock could completely whipsaw. This happens all the time. You really need to be on the ball if you decide to do it.
At my old hedge fund we used to buy aftermarket on Instinet quite often but I would say we broke even.
If you are trying to buy/sell stock after hours where nothing is happening, chances are you will not get a good price because the volume tends to be very low.
So unless you really know what you are doing, I would stay away. A lot of the moves are really psychology driven and that could change in an instant.
IMO, I'd rather trade during the first hour and last hour during the day. You will get the volatility but not be completely exposed to low trading volume or be whipsawed by unexpected news flow.
Actually, I am more of a buy-and-hold type of guy. I am just intrigued by the opportunity that after-hour session offers. I was once told by my friend that by the time the earning announcement is made, the price is reflected already. I thought there should be at least a few minutes windows of opportunity to make profit from it. So I guess I would be right in this case. No?
Doggiedog, you used to work for hedge fund? That's pretty impressive. I think it's every investor's dream to work for a hedge fund. (at least it's mine)
Your friend is mistaken. The news is not always reflected in the stock especially in volatile markets. The key thing is to listen to the CC and understand what is going on. If you don't know the company and just listen to it, you may miss the key points. I've listened to countless calls over the years and have seen stocks flipflop in aftermarket trading both positively and negatively all because of some key news people were expecting or not expecting.
Nah, you wouldn't have been impressed with the hedge fund I was at. It was small. I was an equity analyst for 10 years though.
Miramonti
Lifer
- Aug 26, 2000
- 28,653
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What your friend is referring to is roughly the "buy the rumour, sell the news" generalization. When analysts expect solid numbers, the stock may rally the month or weeks before the announcement etc., but then correct when the good earnings come out.
Another example is the announcement of Stern coming to sirius, SIRI rallied quite a bit for a while, but when he began it sold off (a bit before he began actually.)
Trading 'just breaking news' is rather suicidal to be honest, particularly for small investors. I've been a trader for many years and that's the one thing I absolutely don't do mess with.
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